Indonesia to keep monetary policy relatively tight

Indonesia to keep monetary policy relatively tight

TOKYO (Reuters): Bank Indonesia will maintain a relatively
tight monetary policy until pressures on the rupiah and inflation
diminish, the central bank's managing director Achjar Iljas said
here yesterday.

"I think for the time being and for the immediate future, I
think we will have to maintain a relatively tight monetary
policy," Iljas told Reuters Television in an interview.

"We will maintain that until we believe pressure on the rupiah
and pressure on inflation diminish," he added.

Iljas said a resumption of loans from the International
Monetary Fund (IMF) and other international institutions would
help Indonesia stabilize its economy.

"Our first priority is to provide basic necessities for the
population. With the help of these funds, we can purchase rice
and other essential commodities. It will help us mitigate the
pressure on the majority of the population," Iljas said.

IMF loans to Indonesia were suspended in May amid political
and economic turmoil in the country before and after the
resignation of former president Soeharto.

In June, Indonesia signed a fresh accord with the IMF, which
said an additional $4 billion to $6 billion would be needed on
top of a $41.2 billion rescue package already in place.

IMF Asia-Pacific Director Hubert Neiss said in a statement
released in Jakarta on Saturday that the IMF executive board
would meet on Wednesday for a review of Indonesia's economic
progress which is expected to pave the way for a resumption of
the loan.

As for the task of the central bank, Iljas said the bank will
try hard to control inflation and also the pressure upon the
rupiah.

Iljas also said the agreement reached between the Indonesian
debt negotiation team and creditor banks last month on a program
to solve the country's private-sector debt problems and better
weather conditions for rice production will help ease pressure on
the economy and the rupiah.

Asked whether the central bank has a particular level in mind
about the rupiah, Iljas said, "We believe that in the coming
months the rupiah will strengthen, but it is of course very
difficult to predict to what level. We hope it will appreciate
significantly from the present level."

Iljas said the Indonesian Debt Restructuring Agency (INDRA)
program and other existing programs will help solve the problems
of Indonesian firms' non-performing loans.

The agreement to create INDRA was reached between the
Indonesian debt negotiators and creditor banks in Frankfurt last
month.

INDRA, fully backed by the Indonesian government and
administered by Bank Indonesia, provides exchange risk protection
and assurance as to the availability of foreign exchange to
private debtors that agree with their creditors to restructure
their external debt.