IMF prepares to help RI cope with currency woes

IMF prepares to help RI cope with currency woes

WASHINGTON (Reuter): The International Monetary Fund got ready
to bail out another Asian tiger economy on Wednesday after
Indonesia sought help to cope with a currency crash.

IMF Managing Director Michel Camdessus said in a statement he
welcomed Indonesia's request and measures the authorities were
already taking to cope with market pressures.

"The IMF strongly supports the approach that has been followed
by Indonesia, which sees this as an occasion to strengthen its
economic policies even if fundamentals are basically sound," he
said.

The IMF has already made loans available to Thailand and the
Philippines after the July 2 crash of the Thai baht currency sent
economic shockwaves across Southeast Asia.

The region's tiger economies, once viewed as fast-growing
models of economic success, came under sustained pressure.

Speaking for the IMF's largest voting member, U.S. Treasury
Secretary Robert Rubin welcomed Indonesia's decision to seek help
and said he hoped the body and other institutions would respond
favorably.

"We welcome the announcement by...Indonesia that it is working
with the IMF, the World Bank and the Asian Development Bank to
develop a program to strengthen the financial system and improve
the prospects for future growth," Rubin said in a statement.

A Washington-based monetary source said Indonesia was blessed
with a healthier economy than Thailand's and might not actually
need IMF money. A loan, backed by an economic program, could just
be a vote of confidence.

"It is not clear why the market has been so unsettled," he
said. "If the market pays attention to fundamentals, I am not
sure they are going to need it."

The source said the Indonesian authorities were already doing
the right things to cope with the currency pressures. "They are
in a fundamentally better position than Thailand, they do not
have to reverse course," he said.

The IMF said in its World Economic Outlook, released last
month, that it expected the Indonesian economy to grow by 7
percent this year, down from 7.8 percent in 1996.

"Economic fundamentals in Indonesia, Malaysia and the
Philippines were generally stronger than those in Thailand at the
time of the crisis," it said.

But markets were not convinced. The Indonesian rupiah, trading
at around 3,650 to the dollar on Wednesday, has fallen 33 percent
since July 1.

The Indonesian request for IMF assistance will focus attention
on how to help countries which get into economic trouble or which
are hurt by problems elsewhere.

Japan has floated the idea of a special fund to help Asian
countries in difficulties. The IMF, reluctant to allow funding
which is not linked to strict conditions on economic performance,
is wary of the proposal.

Camdessus said the IMF would work with experts from the World
Bank and Asian Development Bank to provide technical assistance
on reforming the Indonesian banking sector. A second IMF team
would look at a broad economic program.

"It is expected that work on a program will be completed
speedily for submission to the consideration of the IMF executive
board at an early date," he said.

The IMF gave no size for a possible loan package for
Indonesia. It made $1 billion available to the Philippines in
July and contributed $3.9 billion to a $17.2 billion
international bailout for Thailand the following month.

Analysts in Singapore said a loan to Indonesia could be for $4
billion to $6 billion.