'Jury still out' on talks between IMF, Indonesia

'Jury still out' on talks between IMF, Indonesia

WASHINGTON (Agencies): It is too early to tell if the IMF and the Indonesian government will be able to put a stalled economic bailout package back on track, a senior U.S. official said Tuesday.

"The jury is still out," deputy assistant secretary of state for East Asian and Pacific affairs Aurelia Brazeal told a Senate subcommittee.

The Indonesian rupiah rallied Tuesday on expectations a deal would be concluded between the International Monetary Fund and the Indonesian government to revive the US$40 billion package.

Brazeal said that over the weekend "there were some statements to indicate some flexibility on the Indonesian side and some flexibility on the IMF side ... but we don't know the outcome."

In New York, another senior administration official mirrored Brazeal's comments.

In remarks to the Asia Society, Stanley Roth, assistant secretary of state for East Asian and Pacific affairs, said the IMF had shown some flexibility with Jakarta, while Indonesia seemed to be backing away from its plan to establish a currency board that would have pegged the rupiah to the dollar.

"It's way too early to say that the (Indonesian) cabinet is not going to implement reforms," he said.

"This cabinet is not looking for confrontation with the IMF. We all want to help Indonesia but we cannot help if Indonesia doesn't want to help itself. "

"I think there is a closing of the gap on some of the contentious issues," said Roth.

Roth said President Soeharto raised many eyebrows when he appointed a new cabinet at the start of his seventh term. He noted that Soeharto's choices included many of his close confidants but few western-educated technocrats.

But he noted that the new cabinet demonstrated in the past week that it was pursuing IMF negotiations in good faith, as it dropped the currency board plan and shelved the tax on foreign currency purchases.

"Clearly a staggering amount of new money has been produced. That has to be brought under control," he said.

In Washington Brazeal was questioned repeatedly by senators on whether the IMF would cave in on its original demands for political reforms in Indonesia in order to reach an agreement on the bailout.

"I think that because of the deterioration in the economy there will be some adjustments. Some timing of certain things may change or the sequence of some things may be adjusted," she answered.

"But we don't intend to not address all of the issues that have been on the table."

Her comments followed those in Jakarta of IMF Asia-Pacific director Hubert Neiss, who said "progress has been made in all five areas of work defined last week -- monetary policy, bank restructuring, the budget and subsidies, structural reforms and corporate debt."

The talks are not expected to close before the weekend.

A second tranche of some three billion dollars from the IMF package was held up earlier this month on concerns that Jakarta was failing to adhere to reforms demanded in an agreement signed by President Soeharto in January.