Reforms could turn economy around: IMF

JAKARTA (JP): International Monetary Fund managing director Michel Camdessus said yesterday Indonesia had taken decisive steps that, if implemented fully, could turn its economy around.

The IMF chief, speaking to journalists at Hotel Borobudur Inter-Continental, said the reform package which President Soeharto announced earlier was wholeheartedly endorsed by the President.

Camdessus stressed that Soeharto would "take personal responsibility" for the program that abolished long-held monopolies and cartels and insisted on greater fiscal transparency.

"This revitalized program is bold and far-reaching, addressing all of the critical problem areas of the economy and deserving the full support of the international community," Camdessus said in a statement.

"I am confident that, if this program is implemented with the determination and commitment that I myself have seen over the past two days, Indonesia should be able to soon begin to overcome its economic crisis," he said.

World Bank president James D. Wolfenshon shared Camdessus' optimism and said in a statement, "This is a huge step forward in restoring investor confidence."

"The program contains just about everything the government can hope to do to get its economy back on track and to protect the poor from the worst effects of the financial crisis," he said.

Wolfenshon said the World Bank was ready to do its share in providing quick-disbursing loans to support the reforms and help the government implement the program on schedule.

However, Camdessus warned that the government could not backtrack on the current reform program if it wanted to prevent the rupiah and the local stock market from crashing a second time.

The rupiah nose-dived to over 10,000 to the U.S. dollar on Jan. 8, prompting world leaders, including U.S. President Bill Clinton, to step in and urge President Soeharto to stick to an IMF-backed reform program.

Camdessus blamed "vested interests" for obstructing the implementation of the first program agreed by the government last October in exchange for the US$40 billion bailout package.

"The program went off track and the currency free-fell. To my judgment, we have to make sure that it does not occur again," Camdessus said.

He said the fear that some parties could "sabotage" the program triggered President Soeharto to form the Economic and Monetary Resilience Council to oversee the program. The council would be headed by Soeharto himself.

Camdessus said the agreement signed by Soeharto yesterday demonstrated the government's recognition and willingness to deal with existing problems even if they were difficult and painful.

He said the program was also aimed at alleviating the plight of the poor, but said his "thoughts go to those who may experience hardships" as the government gradually reduced sensitive fuel subsidies.

He voiced hope that the program would also encourage businesses to bring their money back for investment in the future of the country.

"We have the impression that the amount which is abroad is not negligible," Camdessus said.

"The amount is extremely difficult to value, but with the return of confidence and a very responsible interest rate policy, this return could intervene rapidly," he added.

The reform program included a commitment to a macroeconomic framework designed to revive economic stability, backed with structural reforms to restore investor confidence.

Central to the program is a detailed set of proposed financial sector reforms and policy changes in the areas of trade and investment, public finance and the strengthening of safety nets to protect the poor.

World Bank country director for Indonesia Dennis de Tray said the bank's staff had collaborated in preparing the reform program, especially in the areas of structural and financial sector reforms.

"The World Bank will support the proposed policy reforms through a set of adjustment and investment loans to be developed as soon as possible," de Tray said. (aly/rid)

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