IMF to tighten monitoring of RI economic reforms

JAKARTA (JP): The International Monetary Fund (IMF) said yesterday that a new agreement with Indonesia on economic reforms would be closely monitored to assure its full implementation.

IMF Asia-Pacific director Hubert Neiss said the government's Economic and Monetary Resilience Council would monitor progress daily in cooperation with the IMF, the World Bank and the Asian Development Bank.

"The credibility of the program depends on its full implementation," he said in a statement.

Neiss and several other IMF officials spent the last three weeks in the capital reviewing progress on reforms with Indonesian officials, and setting new figures and targets.

The IMF has delayed the disbursement of the second $3 billion tranche of the $43 billion bailout package due to the government's backtracking on the 50-point reform program agreed on Jan. 15.

The government complained the January agreement failed to revive the dying economy. It said several points could not be implemented on time because their effects would cause social chaos.

He added that the next disbursement of the loans to Indonesia would be made after agreed actions were implemented. Neiss did not disclose the conditions for the disbursement.

The program adapts macroeconomic policies to the deteriorated economic situation and expands the structural and banking reforms agreed upon in January.

Neiss said: "The main objectives of the program are to stabilize Indonesia's financial situation and to establish the foundations for a resumption of economic growth."

He said the government would soon publish its Economic Memorandum, containing an outline of the economic program and specifying the complete set of policy commitments.

"Their resolute and sustained implementation should gradually restore market confidence and bring the Indonesian economy back to health," Neiss said.

Separately IMF's First Deputy Managing Director Stanley Fischer warned yesterday that the jury was still out on whether Indonesia could implement reforms and the IMF would halt its program if the promises were not kept.

"We have measures in place and if they are not implemented, the program won't go ahead. We have no assurance. We cannot have assurance, given history, that it will be done," Fischer was quoted by Reuters as saying in Tokyo.

Fischer made the remarks ahead of an announcement by Jakarta that the International Monetary Fund (IMF) and Indonesia had completed negotiations yesterday morning and that almost all sectors of the IMF review had made progress.

Indonesia turned to the fund last October as the rupiah plunged amid regional economic turmoil. The IMF arranged a $43 billion bail-out package but backsliding on reform prompted a new agreement in January and there were more delays due to President Soeharto's consideration of a much-criticized currency board.

Fischer said the only signals the IMF had had so far were ones that were given by the negotiating team which reported almost on a daily basis to Soeharto.

"It is not possible for us to go ahead 'no matter what,'" he said, adding that the IMF would have to see if the system as a whole was capable of implementing reforms.

Addressing questions on cartels held by Soeharto's family members, Fischer said structural reform measures included steps to deal with "monopolies that were an important part of the way the Indonesian government or the Indonesian economy operated".

He said measures in the program had deadlines and there were monitoring provisions within the agreement to make sure the deadlines would be kept. (rid)