IMF to begin review of Indonesian reform program

IMF to begin review of Indonesian reform program

JAKARTA (JP): International Monetary Fund (IMF) Asia Pacific
director Hubert Neiss is scheduled to arrive here today to assess
developments in the country and evaluate progress on the economic
reform program.

Coordinating Minister for Economy, Finance and Industry
Ginandjar Kartasasmita said yesterday that Neiss would meet
President B.J. Habibie, economic ministers and non-governmental
figures during his stay here.

"He is coming here to assess developments in Indonesia and to
decide whether or not the reform program has been disrupted by
recent events," Ginandjar told journalists after the first
meeting of the new cabinet which was sworn in on Saturday.

The new government under Habibie, who took over the presidency
from Soeharto last Thursday, has pledged to push ahead with the
economic reform program agreed with the IMF in return for a
bailout package of US$43 billion. The funds committed by the IMF
include a $10 billion loan to help the country's balance-of-
payments.

However, the next tranche of the package, due to be disbursed
on June 5, could be delayed pending the review.

Meanwhile, IMF Managing Director Michel Camdessus said in
Kananaskis in Alberta, Canada, on Saturday that the Indonesia
program required readjustment because renewed weakness in the
rupiah meant that macroeconomic expectations and targets would
have to be revised.

However, Ginandjar said the government did not have plans to
revise targets for economic growth, inflation and the rupiah
exchange rate against the U.S. dollar.

The last assessment made by the IMF and the government
forecast an inflation rate of 47 percent, a rupiah-U.S. dollar
exchange rate of Rp 6,000, and gross domestic product (GDP) of
minus four percent.

When asked about the possibility of bringing the rupiah into
the region of Rp 6,000 to the U.S. dollar, Ginandjar said: "We
are still using that figure as a target. However, whether and
when we can achieve that depends on various factors, not only
economic but also political. So, we must consider all."

The rupiah is currently trading at around Rp 10,000 to the
dollar.

Ginandjar said last Saturday that economic recovery would very
much depend on the restoration of political stability. He then
suggested that a new general election should take place as soon
as possible to restore political stability.

However, yesterday Ginandjar stopped short at calling the
government a transitional government, but said the new
administration would "escort the country into a new era."

"I don't want to use the term 'transition' (for the current
government) because the market and economic players would then
consider the situation to be unfinished, and investors would
continue to be nervous about returning here.

"I would say that this cabinet is escorting (this country)
into a new era. The starting point will be a general election and
the formation of a new cabinet.

"But this cabinet must also try hard to create strong
foundations from which the next cabinet can continue development
efforts."

Timing

Prabhakar Narvekar, special adviser to the IMF said in St
Gall, Switzerland yesterday that the timing of further
disbursements of funds to Indonesia from an IMF-led package
depend on the country's political situation.

Narvekar, asked by reporters if he thought payments would
resume soon, said: "We certainly hope so. It (the package) has
been delayed.

"People will be monitoring the situation in Indonesia...also
to see how the political situation evolves.

"The political situation is not something where we can
interfere," he was quoted as saying by Reuters.

"The success of the economic policy will depend on political
stability, so we have to make sure the political situation
stabilizes before we start being very active."

Narvekar was in St Gall for a management forum.

The country's new government under B.J. Habibie, who took over
the presidency last Thursday after Soeharto resigned, announced a
cabinet which retained many former officials, while ousting
Soeharto's daughter Siti Hardijanti Rukmana and a family friend,
Mohamad "Bob" Hasan.

Habibie "is moving in the right direction, but it is a long
way to go," Narvekar said.

The IMF is leading a $41.2 billion package to help Indonesia's
economy recover. The IMF has paid some of the money, and
Indonesia also has drawn down IMF contingency reserves. But the
timing of further payments is unclear.

Narvekar, an Indian national, said he has been out of
Indonesia for about two weeks. But he said some people from the
IMF had just traveled to and returned from Indonesia.

Pressed to be more specific about his expectations for the
timing of the next payout, he said: "It's hard to say. It depends
on the political situation and the expectation they will do the
things necessary to be done." (rid/prb)