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.