Jakarta reforms restoring confidence: IMF

Jakarta reforms restoring confidence: IMF

SINGAPORE (Reuters): Indonesia's economic reforms are a move in the right direction and are restoring market confidence, International Monetary Fund (IMF) director Kunio Saito said yesterday.

He said that in November and December, the reforms the IMF demanded as conditions for a $43 billion rescue package for Indonesia proved inadequate.

"In January, more recently, the authorities revamped and strengthened these measures and the markets are responding and we're moving in the right direction," Saito told reporters on the sidelines of a trade union conference in Singapore.

He said the idea of a currency board arrangement to help stabilize Indonesia's rupiah, which has lost as much as 80 percent of its value against the dollar since July, was worth looking into.

Under such a system, the rupiah would be pegged at fixed rate to dollar and backed 100 percent by dollars equivalent to money in circulation.

"I think it's an interesting proposal and worth exploring, but it's important to explore all the pros and cons before finalizing the policy," Saito said.

The most important thing right now was to stabilize the markets. After that the currency board option could be explored, he said.

Saito said the Indonesian government had already done a number of important things, like adjusting reform measures.

This "is showing that the government is fully committed and determined to implement all the reform measures. That's very important to give assurance to the markets," he said.

It was also important to ensure Bank Indonesia, Jakarta's central bank, had enough reserves and that the international community helped with the IMF rescue package.

Saito said Indonesia also had to work out some roll-overs and rescheduling of short-term debt with foreign creditors.