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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