IMF wants to continue support

IMF wants to continue support

WASHINGTON (Agencies): The International Monetary Fund is concerned that deepening civil unrest in Indonesia could slow the country's economic reforms and delay the return of investor confidence.

John Boorman, director of the IMF's Policy Development and Review Department, said Friday it was too soon to talk about any further delays in IMF lending to Indonesia, whose capital, Jakarta, has been torn by rioting.

"We are anxious to see the reforms continue and we want to continue our support," he was quoted by Associated Press as saying.

But, he said, "a lot of damage to investor confidence has clearly been done."

As the Asian financial crisis hit last year, Indonesia's currency, the rupiah, lost 70 percent of its value against the dollar and international investors began pulling money out of the world's fourth most populous nation. The IMF stepped in with a $43 billion rescue package that included strict austerity measures.

Some analysts have tied the unrest to the IMF reform program, which included a provision that reduced or ended government subsidies on fuel and food products. Others have linked the wave of rioting and destruction to mounting pressure on President Soeharto, Asia's longest-serving ruler, to step down after 32 years in power.

The IMF also defended its rigorous package of Indonesian economic reforms on Friday, but monetary sources said IMF staffers had already left the riot-torn country.

An IMF spokeswoman told Reuters the reform program Indonesia adopted on April 10 remained "very much appropriate for Indonesia's economic situation, and for restoring confidence and bringing about a resumption of economic growth."

U.S. State Department spokesman James Rubin also backed IMF policies in Indonesia, where 160 people have already been killed in four days of looting and burning.

"We do not believe that the IMF program is the source of Indonesia's troubles," he said. "We continue to believe that a key component in restoring economic growth in Indonesia will be a vigorous program of economic reform as proposed by the IMF."

The rioters, bitter at IMF-mandated price rises for fuel and transport, are also seeking political change and an end to the crony capitalism.

The IMF expects Indonesian output to decline 5 percent this year, after a 5 percent rise in 1997. But many private economists expect a much bigger fall.

"We have forecast a 12.5 percent economic decline, but if the social unrest intensifies ... it is likely to be much steeper than that," Gregory Fager, chief Asia economist at the Institute for International Finance said late on Thursday. Foreign companies are pulling workers out of Indonesia and embassies have advised their nationals not to travel there.

An international monetary source in Washington said IMF staff had also left. "The res rep (resident representative) left last night along with the rest of the mission," he said.

IMF officials in Jakarta said earlier that the weekend arrival of a team reviewing Indonesia's progress in economic reforms had been postponed due to security concerns. Banking sources expected the mission to be delayed by about a week.

Separately, World Bank spokesman Graham Barrett said the bank had chartered a plane to evacuate its international staff from Jakarta, although country director Dennis de Tray and a handful of senior managers would stay in the country.

"We want to ensure the safety of everyone who works there and their families. That is our top priority in the region right now," Barrett said.

He said Indonesian staff were not being evacuated, but would be offered places to stay on the holiday island of Bali or provided with "safe havens" in local hotels in Jakarta.

About 70 foreign nationals and 90 Indonesians would be affected, he said.

Barrett did not know whether the bank would go ahead with plans to debate the release of a new loan to Indonesia next Tuesday. "We are not even thinking about that right now. We are totally focused on looking after our people," he said.

The bank's loan had been held up while the IMF decided whether to resume a stalled lending program.

But IMF foreign exchange targets announced on May 4 have been thrown into disarray after violence on the streets drove the rupiah below 11,000 to the dollar.

The currency had been trading at around 8,000 to the dollar when the IMF resumed lending earlier this month and the fund had expected a rate above 6,000 by the end of the year.

Economists said the currency crash would make any reintroduction of subsidies prohibitively expensive.