Political leaders give assurance to IMF
JAKARTA (JP): The International Monetary Fund (IMF) first deputy managing director, Stanley Fischer, expressed optimism on Saturday that Indonesia's next government would continue with IMF-sponsored economic recovery programs.
Fischer said he had received assurances from Indonesia's top political leaders that they would remain committed to the IMF- prescribed economic programs.
"Nothing that was not consistent with the continuation of the IMF economic programs," he said when asked about the political figures' stance on the IMF-sponsored programs.
"We find ourselves very reassured of this visit," he told a news conference after a marathon meeting with top Indonesian political leaders.
Fischer arrived in Jakarta on Friday for a brief two-day visit. He met President B.J Habibie on the first day and with other political leaders on the second, including popular opposition leader Megawati Soekarnoputri of the Indonesian Democratic Party of Struggle (PDI Perjuangan), chairman of the ruling Golkar Party Akbar Tandjung, founder of the National Awakening Party (PKB) Abdurrahman Wahid and chairman of the Muslim-based United Development Party (PPP) Hamzah Haz. He also met National Mandate Party (PAN) secretary-general Faisal Basri.
The IMF has arranged a US$46 billion bailout fund to help Indonesia cope with its worst economic crisis.
Indonesia held a landmark general election on June 7, its freest election after more than 30 years under the authoritarian rule of former president Soeharto.
Although Megawati's PDI Perjuangan continues to take a commanding lead against Golkar in provisional election results, analysts believe that Indonesia's next government, to be formed later this year, will be a coalition government.
"Fischer is testing the waters," said Fadel Muhammad, a businessmen and economic adviser to Golkar.
Fadel, who also attended the meeting, said Fischer was concerned about whether a coalition government would work well, particularly as the country was still in the early stage of the democratization process.
But Fadel said that in terms of continuation of IMF programs, Fischer seemed confident.
Fadel also said the IMF was considering adding a little more funding to the country on top what has been committed.
But IMF Asia-Pacific director Hubert Neiss, who accompanied Fischer here, declined to confirm.
"We are not considering it right now. But things can change quickly," he told The Jakarta Post.
Indonesia's next government will have to work hard to fix the country's ailing economy, which has put millions of people out of work, and international funding is essential.
Fischer has said that the IMF will continue to support Indonesia as long as it sticks to the fund's economic policies.
Golkar reassured Fischer that his party would continue to adopt IMF-prescribed programs.
"I told Mr. Stanley Fischer that Golkar considers economic development a top priority. We therefore need international economic cooperation, foreign investment and financial assistance from international institutions, mainly the IMF," Akbar told reporters after meeting Fischer.
"And Golkar will strive for the development of an open economy system, with a free market mechanism and to accommodate the government's intervention, especially in sectors connected to small and medium economic development," he added.
Meanwhile, PKB's Abdurrahman Wahid said Indonesia's next government should continue to implement IMF-sponsored economic recovery programs to lift the country out of the devastating economic crisis.
Fischer also voiced satisfaction that PDI Perjuangan would not insist on adopting a fixed exchange rate to stabilize the rupiah.
The party's top economic adviser, Kwik Kian Gie, earlier said the party was considering pegging the rupiah at a stronger dollar rate.
"We both agree at present that the floating exchange rate system is working well," Fischer said after meeting with Kwik.
Kwik concurred, saying: "When it comes to application of economic policies, we don't have differences with the IMF."
Fischer is confident the rupiah will continue to strengthen.
He said there was no reason for the government to buy dollars right now to add to its foreign exchange reserves because the current level of the rupiah was still undervalued compared to other regional currencies. He said the current level of the country's gross foreign exchange reserves was still sufficient.
"But if confidence returns to Indonesia and if the new government takes off smoothly, then there will be a capital inflow and I expect the government will buy dollars," Fischer said, adding that at the Rp 5,000 level, the government might consider to purchasing hard currency.
The rupiah has appreciated aggressively since early this month, although it depreciated slightly on Friday to Rp 7,295 to the dollar.
The governments of Thailand and South Korea have bought more dollars to prevent their currencies from appreciating too fast which may cause difficulties for their export sector.
On PAN's suggestion that the country follow Malaysia's lead in imposing a control on short-term capital inflow to stabilize the currency, Fischer said: "We don't see much potential for this succeeding in Indonesia right now. And I don't see the need to impose a capital control. What Indonesia needs is to continue with its bank and corporate restructuring programs."
PAN's Faisal Basri, representing party chairman Amien Rais who is in Saudi Arabia, told the media after the meeting that the IMF would allow further restructuring of the country's sovereign debt, but ruled out any wholesale debt relief for the country. (rei/imn).