Kwik says paying all IMF debts good for economy

The Jakarta Post, Jakarta

State Minister for National Development Planning Kwik Kian Gie said that repaying all debts to the International Monetary Fund (IMF) when its program here ends would not harm the efforts to maintain fiscal sustainability and investor confidence.

Kwik said on Tuesday that Indonesia could well survive any financial strains that might result from such a move, which, he claimed, might even enhance confidence in the economy.

"Financial calculations show that by repaying all its debts to the IMF, Indonesia would still have strong (foreign exchange) reserves, even better than this country used to have in the past," Kwik told a press briefing upon the conclusion of a two- day national interdepartmental meeting.

He was responding to questions as to what the best possible options were for Indonesia after the current IMF program expired at the end of the year.

A special team, set up by the government earlier this year, is now undertaking an analysis on what options are available and what steps need to be taken by the government post the IMF program so as not to harm the economy.

There are a number of options already circulating in the public arena, but it seems that the most feasible boil down to three alternatives.

One is ending the program altogether, with all the debts immediately being repaid. The second is ending the program by the end of this year, but only repaying the IMF loans at a level that is slightly below the country's debt quota as a member of the IMF. The quota for Indonesia now stands at about $3 billion.

Both these options require no more assistance from the IMF.

Under the third alternative, Indonesia would enter into a post-program monitoring arrangement with the debts being repaid based on the original schedule, which runs until 2010.

This option means the IMF would still have the right to come and assess the country's economic policies four times a year, although the assessments would not be binding.

Kwik, however, was sure that the first option was the best for the country, as repaying all the debts would send signals that Indonesia was no longer in need of continued support from the IMF, thus boosting confidence in the international community that the country was well on track towards recovery.

Currently, the country's international foreign reserves stand at around $34.1 billion, while its debts to the IMF amount to Rp 8.4 billion.

"If we repay all the debts, we'll still have about $25.7 billion left, which is far more than the $14 billion to 16 billion of reserves we used to have under the New Order regime."