Indonesia can manage without IMF, says Citrin

Indonesia can manage without IMF, says Citrin

The Jakarta Post, Jakarta

The Senior advisor to the International Monetary Fund's Asia
and Pacific Department, Daniel Citrin said on Thursday that if
the market situation remained stable, Indonesia's financial or
fiscal condition would be manageable even without special
financial aid from the Fund and the Paris Club of sovereign
creditors.

Citrin said at a press conference that it was entirely up to
the Indonesian government to decide on the kind of financial
relationship it would have with the International Monetary Fund
(IMF) after December, when the current Extended Fund arrangement
ends.

"There are three options available for Indonesia upon the
completion of the current arrangement. But for sure, the current
facility that began in February 2000, can no longer be extended,"
added Citrin, who is here for the ninth quarterly review of the
reform programs.

Citrin was accompanied by Stephen B. Schwartz, division chief
of the IMF Asia and Pacific Department and David Nellor, the
IMF's chief representative in Indonesia.

The three options, according to Citrin, would be to request a
Standby Arrangement, a Precautionary Standby Arrangement or
nothing at all, but each alternative would have its own
conditions and consequences.

Under a Standby Arrangement, which normally has a term of
between 12 and 18 months, Indonesia would still have access to
special loans from the IMF contingent upon approval of its reform
programs by the IMF Executive Board. Such an arrangement would
also still enable the government to request a rescheduling of its
debt from the Paris Club.

The conditions of the Precautionary Standby Arrangement are
similar to the Standby Arrangement, except that the government
would be ineligible for any debt rescheduling from the Paris
Club.

Thirdly, Citrin added, completely ending any special
arrangement with the IMF would deprive the government of any
chance of debt rescheduling.

"At this stage, if the economy continues to stabilize, market
confidence continues to improve, the rupiah strengthens and the
interest rate keeps declining as they have done over the past
year, our general conclusion is that the financial or fiscal
condition will remain manageable," he said.

"(Quitting the IMF program) is a reasonable objective to shoot
or strive for. It is not impossible for Indonesia to survive
without special loans from the IMF and Paris Club," Citrin
stated.

He nonetheless cautioned that the final scenario would still
depend on how the situation developed over the next seven months
when the precise numbers would become much clearer.

"But if you ask for my personal view and if I were Indonesia's
chief economics minister, it would make sense to keep my options
open and decide later on, in view of the uncertainty about the
global economy," he added.

There have been increasing pressures from politicians and
economists for the government to stop negotiating any special
arrangement with the IMF after the end of the current program.
This was also one of the recommendations made last year by the
People's Consultative Assembly, the nation's top policy-making
body.

Staunch critics of the IMF, from both the government and
private sector, often cite several major mistakes made by the IMF
in Indonesia in the 1997-1999 period, as well as the rigidity of
its policies, as the main reasons for stopping all special
arrangements with the IMF.

The IMF detractors claim the country's gross foreign reserves
of about US$33 billion and the strengthening macroeconomic
stability would enable the country to manage its economy without
any special loans from the IMF or the Paris Club.

However, Minister of Finance Boediono warned last week that
without another rescheduling of the debt from the Paris Club, the
government's foreign debt service payments would almost double to
Rp 74 trillion (US$8.4 billion) next year, in addition to its
domestic debt service burden, which would increase by 22 percent
to Rp 83.5 trillion.

Defenders of the IMF in Indonesia have argued that the market
would be more comfortable if the government maintained a special
arrangement with the IMF, at least for one year, in view of the
politically turbulent period expected ahead of the 2004
elections, in addition to the lack of government credibility with
regard to reform implementation.

Citrin corrected some misunderstandings among many Indonesian
analysts, who believe the government would have to prepay the
bulk of its debts ($8.6 billion) to the IMF if it no longer had a
special arrangement with the IMF.

"Whichever of the three options Indonesia may take, it will
not have to make any debt prepayment, but simply install the
debts according to the original payment schedules," Citrin noted.

He said he simply did not know how the market would react to
any of the three options Indonesia might take, but maybe the
market would prefer the first option (the Standby Arrangement).

But whichever option is taken, "We expect the government to
continue its structural reforms. After all, the reforms have
always been the government's own programs, even under the current
arrangement," Citrin added.