IMF reviews RI's reform program

IMF reviews RI's reform program

WASHINGTON (Reuters): A team of experts from the International Monetary Fund is reviewing the progress on Indonesia's economic reforms before the fund makes the second disbursement of US$3 billion of the bail-out package due next month.

An IMF spokesman said Tuesday the team would report back to the IMF management and the executive board. He did not know how long the review would last or who would lead the IMF team.

"An IMF staff mission is in Jakarta to review Indonesia's performance under its IMF-supported economic program, including a careful review of the progress of structural reforms," he said.

The IMF has so far disbursed some $3 billion from a package of $23 billion put together by the fund, the World Bank and the Asian Development Bank.

Commitments from other nations to a second line of defense have brought the overall Indonesia bail-out package to $43 billion.

The IMF has already expressed strong concern about a controversial proposal to introduce a currency board, which would peg the rupiah currency to the dollar and back all cash in circulation with central bank reserves.

IMF Managing Director Michel Camdessus said in Paris that a currency board was not the right medicine for Indonesia.

"At this very moment it is the view of the IMF, supported by the entire world community, that the currency board medicine would kill the Indonesian patient," he said.

Assistant U.S. Treasury Secretary Timothy Geithner told Washington's Asia Society on Tuesday that Indonesia appeared to be reconsidering whether to introduce the currency board.

"They seem to have reassessed and reconsidered. they have lost a bit of enthusiasm for that as a quick fix to their problems. They have not renounced the idea, but I do not think anyone expected that," he said.

U.S. officials highlighted their concern about troubled Indonesia on Tuesday while praising other Asian tiger economies for moving forward on reform after last year's international rescue deals.

Treasury Secretary Robert Rubin, speaking to reporters after a luncheon meeting in Washington, said the situation in Indonesia was different from that in Thailand and South Korea, which were pressing on with reform programs.

"I think that in Korea and Thailand (the government) has worked very well toward implementing the IMF programs. I think they are on a very constructive path," Rubin said. "In Indonesia, you obviously have a somewhat difficult situation."

White House spokesman Mike McCurry echoed that line. "It remains a serious situation and it is important for the government of Indonesia to promulgate the reform program," he told reporters.

Concern

U.S. concern centers on doubts over whether President Soeharto is committed to reforms agreed with the International Monetary Fund and whether he will go ahead with a controversial proposal for a currency board, pegging the rupiah to the dollar and backing all cash in circulation with central bank reserves.

"It is very important that Indonesia reestablish confidence by enacting and fully implementing the reforms to which it has committed," Trade Representative Charlene Barshefsky told reporters after a congressional hearing.

German Finance Minister Theo Waigel yesterday repeated a warning to Indonesia not to go ahead with plans to adopt a currency board system to try to overcome its economic crisis.

Waigel, who met Soeharto in Jakarta recently, told a meeting in Passau : "I regret that Indonesia's President has not recognized what the impact of a wrong currency step on the country could be."

Meanwhile, Australian Foreign Minister Alexander Downer said in Adelaide yesterday that Australia supported the IMF's $43 billion rescue package for Indonesia but the IMF should also be sensitive to Indonesia's social environment.

"It is important as the IMF develops its relationship with the Indonesian government not only that the process of reform and pace of reform is maintained, but the IMF is sensitive to the social environment in Indonesia," Downer told reporters.

Asked if the Australian government was considering discussing with Indonesia or the IMF plans for the rescue package to be more lenient, Downer said Australia supported the IMF package.

"Remember we are contributing to the IMF package", he said.

The Australian government plans to contribute $1 billion to the package, the same amount it is providing to bailouts for Thailand and South Korea.

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