RI can resist tough IMF terms: Analyst

JAKARTA (JP): Indonesia may well resist implementing some of the tough economic reforms sought by the International Monetary Fund (IMF) and the United States, a senior economist said Saturday.

Indonesian technocrats could argue with the IMF team or with the U.S. delegation, and pose the question: "Is it fair and wise to insist on the IMF's prescribed budget surplus when the situation is this bad?" Mohammad Sadli said.

Sadli, a former economic minister and now a lecturer at the state University of Indonesia, is anticipating a keen debate between the Indonesian government and the IMF team during their emergency consultations in Jakarta this week.

The IMF, which organized a $40 billion rescue loan package for Indonesia in October, announced Thursday it was sending the team after the world's foreign currency markets gave the thumbs down to the Indonesian government's 1998/1999 budget announced by President Soeharto two days earlier.

U.S. President Bill Clinton has also dispatched Deputy Treasury Secretary Lawrence Summers to Indonesia, with the chief message that Jakarta should follow the IMF reform plans, officials in Washington said.

Jeffrey Sachs, a senior economist from the Harvard Institute of International Development who has advised the Indonesian Ministry of Finance, is expected in Jakarta today, possibly to act as a consultant for Indonesia, Sadli added.

"Prof. Sachs is very vocal in his criticism of the IMF orthodoxy.

"In the debate on monetary and fiscal policies, Indonesia need not give in to the IMF orthodoxy that easily," Sadli said.

One of the terms of the loans demanded by the IMF is for the government to earn a surplus in its budget equivalent to one percent of the country's gross domestic product.

Jeffrey Sachs on Saturday blamed the IMF for aggravating Asia's financial crisis, but said regional economies should begin to recover before long.

Sachs, director of the Harvard Institute of International Development, told a business conference in Madras, India that the crisis in East Asian economies had resulted from a "panic withdrawal" of funds from their markets.

"My sense is that the IMF added to the panic," he said. He said the Fund had erred by using the same rescue technique employed in the past instead of specific remedies tailored to the differing needs of Asian economies.

The IMF is scheduled to disburse the next $3 billion installment of the loan for Indonesia in March, but is expected to insist on more economic reforms before then.

The 1998/1999 budget plan, which envisages a 32 percent increase in both spending and revenues to Rp 133.5 trillion, failed to address the surplus issue although officials say that the government would strive to fulfill that obligation.

Sadli said Indonesia would not be able to fulfill that obligation if it continued its domestic fuel subsidy to the tune of Rp 10 trillion in 1998/1999.

"This was a political decision made in December, and it is understandable," Sadli said.

He said however that Indonesia could still fulfill the IMF's budget surplus stipulation, "at least on paper" because the budget does not start until April 1, under a new government.

"So why not sweeten it on paper?" he asked.

Another economist from New York State University, J.S. Uppal, said Saturday that not all of the IMF prescriptions for Indonesia would be efficacious in overcoming the economic crisis.

"Not all of the IMF terms should be met. The Indonesian people know better (than outsiders) about their economic problems," Uppal was quoted by Antara as saying at a seminar in Yogyakarta. (emb)

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