Ministers, BI chief meet 20 foreign fund managers

JAKARTA (JP): Minister of Finance Mar'ie Muhammad promised yesterday to accelerate financial sector strengthening, deepen structural economic reform through deregulation and consolidate fiscal management to pull the country out of its monetary crisis.

After meeting with 20 foreign fund managers, Mar'ie said the government had actually taken measures to restore market confidence but they were not enough.

In another effort to restore confidence, Mar'ie said, the government had established a four-point plan to get Indonesia back on track.

"First, we have to expedite financial sector strengthening or rehabilitation," said Mar'ie, who was accompanied by Bank Indonesia governor J. Soedradjad Djiwandono and Minister of Industry and Trade Tunky Ariwibowo.

Mar'ie said that the government had asked for assistance from the International Monetary Fund (IMF) and the World Bank to mend the financial sector.

Besides, Mar'ie said, the government would continue to pursue deeper structural economic reform, including through deregulation measures.

The government would also consolidate fiscal management to maintain a balanced budget.

"In any circumstance, the government will not tolerate a deficit in the budget,"

And the government would continue efforts to stabilize the rupiah's exchange rate, to add certainty to the business sector.

The rupiah, along with other regional currencies, has seen speculative attacks since the de facto devaluation of the Thai baht on July 2. Since then, the rupiah has lost over 35 percent of its value.

Indonesian financial markets surged yesterday after the government met foreign fund managers to explain the decision to seek IMF help to restore confidence in the battered rupiah, dealers and brokers said.

The rupiah broke through the 3,400 barrier against the U.S. dollar to close at 3,355/65, compared to the opening of 3,470/90.

The stock market, boosted by the strengthening rupiah, jumped 2.62 percent or 13.64 points, to close at 534.75 points.

The government, Mar'ie said, had also asked the World Bank and the Asian Development Bank to help.

"We, the government, are optimistic, fully optimistic, that we can reach a consensus with the IMF, the World Bank and the Asian Development Bank," Mar'ie said.

Brian M. O'Connor, director of Lehman Brothers' investment banking division in Singapore, predicted that a main focus of the IMF would be in the banking sector.

He said Indonesia's banking sector was now facing a quality problem in assets as a result of the high interest rate policy imposed by the central bank to shore up the rupiah.

Officials from the IMF, in addition to the World Bank and the Asian Development Bank, will begin to devise a package of recommendations aimed at restoring confidence in the Indonesian economy on Monday.

Another goal would be to rebuild Indonesia's foreign exchange market, which World Bank country director for Indonesia Dennis de Tray said was "very thin" because no dollars were coming in.

Mar'ie declined to predict what conditions the IMF might tie to financial aid given to Indonesia, saying it was premature to comment on what he expected from negotiations with the IMF.

Tunky added that the government had to "discuss (it with IMF officials) and make everyone concerned understand".

"I think we have to see this project in a long-term perspective for our economy. We believe that this project has merit to protect the long-term interests of our economy," Tunky said.

Soedradjad added that the IMF should not ask for many conditions from Indonesia as the government had basically imposed "IMF medicine" to tackle the currency crisis. (rid)

Doctor IMF -- Page 5

Rupiah -- Page 11