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)