IMF's prolonged role in Indonesia questioned

IMF's prolonged role in Indonesia questioned

Berni K. Moestafa, The Jakarta Post, Jakarta

Some experts have voiced concern over the prolonged presence
of the International Monetary Fund (IMF) and its undermining of
the Indonesian government's sovereignty in pushing its own
economic reforms program.

The government's signing of a fourth letter of intent (LoI)
could pave the way for the disbursement of the IMF's US$360
million loan, but CIDES economist Umar Juoro said it was tied to
too many conditions.

"The more targets the more it is difficult to comply with the
LoI," he told The Jakarta Post on Friday.

The government has pledged to meet the IMF's new reform
targets under the LoI as a prerequisite to obtaining the loans.

With 53 conditions, the latest LoI has become more elaborate
than the third one which had only 35 conditions.

Umar said the government should take the reform targets out of
the LoI and made them part of its own program independent of the
IMF.

"The IMF is not designed to handle micro economic issues, it
is overstepping its own role," he said.

But Finance Minister Boediono said the LoI was drafted by the
government in line with what it saw as demands for reforms from
the financial market.

Umar called this a poor excuse to allow the IMF to meddle with
Indonesia's sovereignty over an extended period of time.

"We must separate the IMF's tasks from that of the government
in reforming the economy," he asserted.

Claims that the IMF helped prevent the reforms targets from
derailing due to the country's many vested interest groups, also
missed the point of having the IMF in the first place, he said.

Umar added that such claims only underscored the weak
leadership that marked the current government.

IMF critics have surfaced from time to time mostly on the heel
of drastic reforms measures under the LoI.

The IMF came to Indonesia's rescue in 1997, after the
financial crisis led to the near collapse of the entire economy.

Its job was to provide liquidity support for the government's
dwindling foreign reserves, which had been used defending the
rupiah against speculators and hedgers.

The IMF arranged a loan package worth $23 billion from
international lenders such as the World Bank.

However, the bailout came at a heavy price of surrendering a
part of Indonesia's economic sovereignty to the Fund.

As part of the loans preconditions, the government launched
massive reform programs to weed out inefficiencies in the
economy.

But while countries like Thailand and South Korea have exited
the IMF's program, Indonesia has not.

This is because of the political chaos that followed the 1997
crisis that badly impaired the economic reform program.

Prolonged political instability coupled with wide-spread
security problems have been a major drag on reforms.

Consequently, the country is still left with a stagnant
economy.

Next year will mark the last year under the IMF, unless the
Fund grants Indonesia's bid to extend the terms for another year.

This is to secure a debt rescheduling deal for next year with
Indonesia's creditors, collectively called the Paris Club.

Although an extension is urgent, its reasons did not justify
the IMF's presence in the country, according to legislator Faisal
Baasir of the House of Representatives' Commission IX, which
oversees financial affairs.

In a further sign of indecisiveness, Coordinating Minister for
the Economy Dorodjatun Kuntjoro-Jakti said the government needed
the IMF until the country's risk rating had improved.

While the IMF's senior representative to Indonesia David C.
Nellor said the Fund would continue helping the country for as
long as the government felt it needed the IMF.