Indonesia urged to press on with restructuring

Indonesia urged to press on with restructuring

SINGAPORE (AFP): Indonesia must proceed immediately with bank and corporate restructuring despite political uncertainty, top International Monetary Fund (IMF) officials said.

There was reason for optimism over Indonesia's economic fortunes following a return to positive growth in the first three months of the year, "ahead of expectations," but the country had to see two more quarters of growth before it could say it was on an uptrend, IMF Asia Pacific director Hubert Neiss and deputy director Anoop Singh told Singapore's Business Times on Monday.

"Now we have macro (economic) stability in Indonesia, it is overwhelmingly important that we move on to bank and corporate restructuring," the IMF officials said in the interview.

"The next six months will be crucial. The process must go forward and should not wait until November when there is a new government. There is a program in place and it should be implemented. There is no time to waste," they added.

The recent strengthening of the rupiah would also facilitate bank and corporate restructuring, the IMF said.

"It will help the cleaning up of balance sheets. Under an overdepreciated exchange rate, corporates and banks tend to postpone restructuring until the exchange rate is in a credible range.

"A stronger exchange rate will also help to keep inflation low," they added.

They also reiterated the commitment of major Indonesian political leaders to the IMF program, following a meeting with them in June, saying there "is widespread consensus" among the leaders "that the program is working."

"The leaders explicitly voiced agreement with the program and stressed that continuity will be assured," the IMF officials said.

"Of course this does not mean every comma and fullstop in the program will be as it is. There is room in the program to adapt it and improve it," they added.

The IMF arranged a 46 billion-US dollar bailout for the Indonesian economy, which was hardest hit by the Asian financial crisis in 1997.

Indonesians on June 7 voted in the freest election in decades. The opposition Indonesian Democracy Party-Struggle (PDIP) of Megawati Sukarnoputri is rated as the front-runner to replace former strongman Suharto's Golkar party, now led by President B.J. Habibie.