International lenders support new economic team

International lenders support new economic team

JAKARTA (JP): Multilateral lenders including the International
Monetary Fund (IMF), the World Bank (WB) and the Asian
Development Bank (ADB) vowed on Thursday to support the new
Cabinet and in particular the new economic ministers in their
effort to accelerate the country's economic recovery.

The IMF's Jakarta representative, John Dodsworth, said that
the Fund expected to be able to immediately discuss the overall
economic reform program with the new economic team.

"We extended our support to the new economic team and
indicated to them that the IMF is there to serve its members and
we would like to work in harmony," Dodsworth said in a joint
press conference with the new economic team, WB, ADB and Bank
Indonesia which followed an informal meeting.

WB and ADB representatives also expressed similar support.

"We welcome very much the new economic team," said WB senior
advisor in Jakarta Sarwar Lateef.

"We have a mutual interest in their success, and we'll do our
best to help them to accomplish it," Lateef added.

The WB and ADB have provided huge financial aid to help
finance the current 2000 state budget.

The IMF has pledged to provide the current administration with
some $5 billion in loans to help finance the country's 3-year
economic reform program. The Fund has so far disbursed a loan of
some $730 million and it was expected to disburse another $400
million later this month.

But when asked whether the Fund remains committed to the
schedule, Dodsworth said: "We still have to discuss it again."

The financial market reacted negatively on Wednesday to the
new Cabinet of President Abdurrahman Wahid and particularly to
his choice of economic ministers.

The focus of controversy was the appointment of Prijadi
Praptosuhardjo as the new finance minister. Prijadi, a close
friend of Abdurrahman's and former director of the state-owned
Bank Rakyat Indonesia, was initially plotted by the President to
lead the bank but unfortunately he failed to pass the central
bank's fit-and-proper test due to past mistakes he had made in
the industry.

The appointment of Rizal Ramli as the new Coordinating
Minister for Economic Affairs, Cacuk Sudarijanto as Junior
Minister for the Restructuring of the National Economy, and Luhut
Pandjaitan as Trade and Industry Minister has also created
concern because the three are known as Abdurrahman loyalists.

There's been speculation in the market that Vice President
Megawati Sukarnoputri has been disappointed by the choice of the
economic ministers because none of her associates were included
in the lineup. Megawati is the chairwoman of the Indonesian
Democratic Party of Struggle (PDIP), the largest faction in the
parliament.

The rupiah immediately dropped by around 5 percent late on
Wednesday to Rp 8,365 to the U.S. dollar following the
announcement of the new Cabinet.

On Thursday, the local currency reached a low point of Rp
8,500 to the U.S. dollar but closed slightly higher at around Rp
8,375 to the dollar after to a strong denial by Megawati of
rumors that she would resign.

Prijadi declined to provide a significant statement during the
press conference.

"I don't know why the market is negative about me... I will
not resign. I will try to do my best to prove ... to satisfy the
market," Prijadi told reporters after the press conference.

Rizal reiterated his earlier statement that the negative
sentiment would disappear once the new economic team could prove
that they were a solid team.

"I think the market reaction is only temporary ... the new
economic team is very solid," said Rizal.

"When the new economic team starts working on Monday all the
temporary market responses will be eliminated," he said.

Rizal also said that the new economic team remained committed
to implement the IMF-sponsored economic reform program, although
both sides needed to sit together to discuss some new ideas.

"The bottom line is how we are going to improve the relations
between the government and the multilateral institutions like the
IMF," he said.

Meanwhile, Bank Indonesia's Anwar said that the central bank
welcomed the appointment of the new economic ministers and was
looking forward to increased cooperation with the team to help
create macroeconomic and monetary stability and accelerate
economic recovery.

"Bank Indonesia welcomes the new economic team," Anwar said.

"I personally don't have any problem with Prijadi," he added.

Bank Indonesia has been an independent central bank since last
year. (rei)