Japan supports RI reforms under IMF agreement
Japan supports RI reforms under IMF agreement
TOKYO (Agencies): Prime Minister Ryutaro Hashimoto pledged Japan's continued support for Indonesia's economic rehabilitation yesterday following the signing of an agreement linked to a massive IMF-led bailout.
"I sincerely welcome it," he commented on the new letter of intent signed earlier in the day in Jakarta by President Soeharto and Michel Camdessus, managing director of the International Monetary Fund (IMF).
The 50-point letter spelled out major reforms and austerity measures to deal with Indonesia's financial turmoil.
"I sincerely hope that this will help restore confidence in the Indonesian economy and recover its stability," Hashimoto told reporters at his official residence.
"As a friend of long standing, Japan intends to continue its assistance toward an early recovery of the Indonesian economy," he added.
His remarks were contained in a message sent later to Soeharto, government officials said.
Finance Minister Hiroshi Mitsuzuka also said the agreement would "contribute to the restoration of confidence in the markets."
"Japan for its part wishes to assist Indonesia in cooperation with the IMF and countries concerned," the finance minister said.
On Monday, Soeharto assured Hashimoto that Indonesia would fully carry out reforms prescribed under an IMF rescue plan, the Indonesian President's top aide said in Jakarta.
Minister/State Secretary Moerdiono told journalists that Hashimoto phoned Soeharto from Tokyo to discuss Indonesia's problems, topped by the sharp fall of the local currency the rupiah.
Soeharto also assured Hashimoto that any differences between Indonesia and the IMF "would only be on the timing of the reform and restructuring programs, " Moerdiono said.
Hashimoto's gesture followed similar telephone calls by U.S. President Bill Clinton, who sent a high-level mission to Jakarta to take a first-hand look at the situation, as well as German Chancellor Helmut Kohl and Australian Prime Minister John Howard.
Realistic
Indonesia's new reform package announced on Thursday is more realistic about the country's economic state, but analysts said Japanese bankers are likely to balk at the failure to guarantee private-sector loans.
"We can see that the forecast on the country's growth and inflation now looks more realistic," said Daisuke Hiratsuka, deputy chief of econometric analysis and forecasting division at Institute of Developing Economies (IDE).
"The forecast (in the revised budget) appears to reflect more precisely on the current situation in Indonesia," he added.
But bankers in Japan, Indonesia's biggest creditor with billions of dollars tied up in loans there, will not take kindly to Soeharto's announcement that the government will not bail out the private sector, analysts said.
"Most of the reform measures were expected. What really is shocking is that (Soeharto) said the government will not bail out private-sector debt," said a senior analyst at Nomura Securities in Tokyo who declined to named.
According to the Bank for International Settlements (BIS), Indonesia's total foreign bank borrowings were $58.7 billion as of the end of June 1997.
Japanese banks accounted for 39 percent, or $23 billion, of all international loans to Indonesia in the first six months of 1997.