IMF talks end in consensus on exchange rates

JAKARTA (JP): A two-day conference on ASEAN economics ended here yesterday, with consensus that significant misalignment of regional exchange rates must be avoided.

The conference, co-sponsored by Bank Indonesia and the International Monetary Fund (IMF), also concluded that sound macroeconomic fundamentals were important, especially those relating to fiscal policies, domestic savkngs rates and investment.

Bank Indonesia Governor J. Soedradjad Djiwandono said the conference's conclusions were important guidelines for the future growth of the Association of Southeast Asian Nations (ASEAN), which groups Brunei, Indonesia, the Philippines, Malaysia, Singapore, Thailand and Vietnam.

On macroeconomic fundamentals underlying ASEAN's performance, the conference revealed there was substantial support for the view that the region's economies would remain strong in the medium term, he said.

The upbeat view on the region's economic future was based on the ability of the regional governments to maintain macroeconomic stability, especially low inflation.

Soedradjad said that optimism on the region's economic performance was also based on the fact that regional governments were vigilant and well focused on keeping inflation low and reducing current account deficits.

"While it bears emphasizing that these external deficits were not viewed as unsustainable in the region, there was support for reducing them in order to minimize risks arising from external shocks or changes in investor sentiment," he told journalists after the conference.

Several world-class financial and macroeconomic experts addressed the conference, including IMF managing director Michael Camdessus.

In his address, Camdessus warned ASEAN governments about their high current account deficits and the soundness of their financial systems.

Funds

Soedradjad said yesterday that vigilance, especially against a massive rush of short-term funds, was increasingly difficult because macroeconomic management had become more complex with globalization.

"Nevertheless, a number of initiatives have been launched to adapt monetary policy to the reality of financial liberalization, to increase domestic savings even further in the private and public sector," he said.

He said the conference stressed that the government's role in maintaining macroeconomic stability was important.

"An important message has been that, while the size of the public sector can, and indeed should, be reduced, the government retains a critical role in maintaining an environment conducive to high-quality growth," he said.

Maintaining macroeconomic stability and moving forcefully on structural reforms are the key responsibilities of government's, he said.

Several important subjects were discussed at the conference, including sustaining the macroeconomic performance of the ASEAN region, savings, investment, the current account and topics related to monetary policy, financial liberalization and capital market development. (hen)

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