IMF stresses need for BI independence

IMF stresses need for BI independence

JAKARTA (JP): The International Monetary Fund (IMF) reiterated
on Thursday the importance of maintaining the independence of
Bank Indonesia and its monetary policy to ensure the recovery of
the country's economy.

"It's important for Indonesia to maintain the independence of
the central bank," IMF Jakarta representative John Dodsworth told
reporters following a meeting with House of Representatives
Speaker Akbar Tandjung.

Dodsworth said that the IMF was invited by Akbar to discuss
the amendment of the central bank law.

"We gave some inputs and some recommendations ... Some are
technical in nature, but they basically try to balance better
accountability in Bank Indonesia with preserving the independence
of the central bank and the independence of the monetary policy,"
he said.

"We do see some problems in some of the amendments, but I
don't want to go into details of particular amendments at this
time," Dodsworth said in response to a question of whether the
IMF sees certain problems with the government-proposed amendment
of the central bank law.

Elsewhere, Dodsworth also said that the IMF managing director
would meet with Coordinating Minister for the Economy Rizal Ramli
on Friday at the World Economic Forum in Davos, Switzerland.

Sources said that Rizal would also meet with World Bank
president James Wolfensohn at the five-day forum.

The IMF is providing a multibillion dollar bailout fund to
help finance the country's economic reform program. Out of the
US$5 billion loan promised in January 2000 to the administration
of President Abdurrahman Wahid, the fund has already disbursed
some $1 billion.

The IMF was supposed to disburse another $400 million loan in
December last year, but it delayed the disbursement due partly to
concern over the amendment of the central bank law.

The government expects the IMF to disburse the loan sometime
between February or March. The IMF loan is seen as crucial in
helping to revive investor confidence in the economy.

The House of Representatives special team is currently
debating the government-proposed amendment of the central bank
law. The legislators are expected to complete the deliberation
process later this month or in the middle of February.

Critics have said that the amendment was primarily aimed at
accommodating the demand of the President to oust Bank Indonesia
Governor Sjahril Sabirin and his deputies, in order to replace
them with people close to the President.

The proposed amendment includes the possibility of allowing
political party representatives to either head the central bank
or become members of the board of governors.

Meanwhile, Akbar confirmed at a press conference that the IMF
had insisted that the amendment of the central bank law should
not jeopardize the independent status of Bank Indonesia.

"But their recommendations were not meant to intervene with
the House ... it was made in the spirit of strengthening the
independency of Bank Indonesia," Akbar said.

He said that the independent status of Bank Indonesia was
crucial to ensure the recovery of the country's ailing economy.

He also said that the IMF supported the role of the House to
monitor the performance of Bank Indonesia in implementing its
monetary policy.

Akbar said that the IMF had also recommended the need to form
a new body to oversee the operational side of Bank Indonesia.

"The House will monitor the political aspects, while the new
body will monitor the operational side," he said, adding that
this was taken from a model implemented in Sweden.(rei)