Reforms could turn economy around: IMF

Fri, 16 Jan 1998, 00:00 WIB | Source: JP

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)