Political leaders give assurance to IMF

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).