RI commitment to IMF reform: Mar'ie

RI commitment to IMF reform: Mar'ie

JAKARTA (JP): Minister of Finance Mar'ie Muhammad has
reassured the finance ministers of the Group of Seven (G-7)
developed nations that Indonesia remains firmly committed to the
International Monetary Fund (IMF)-sponsored reform package.

Mar'ie told the House of Representatives yesterday he gave the
reassurance in a letter to G-7 finance ministers who are meeting
in London this weekend.

"We also ask them to consider credit guarantees for Indonesian
letters of credit to help exporters who need imported basic
materials," he added.

The Ministry of Industry and Trade said Thursday that several
industrialized countries, including Japan, Australia and the
U.S., would provide credit guarantees for Indonesian exporters to
import raw materials.

International Trade Director General Djoko Moelyono said
discussions about similar assistance were being held with
Germany, Singapore and the Netherlands.

Questions about Indonesia's seriousness to implement the IMF
economic reforms, signed by President Soeharto on Jan. 15 as a
condition to a US$43 billion bailout fund, have heightened as the
government is planning to adopt a fixed exchange rate under a
currency board system (CBS).

IMF managing director Michel Camdessus warned last week that
the IMF might discontinue its financial assistance for Indonesia
if the government pushed ahead with its fixed exchange rate
scheme at this point in time.

A CBS is a monetary regime based on an explicit legislative
commitment to exchange domestic currency for a specified foreign
currency at a fixed exchange rate.

Mar'ie reaffirmed that Soeharto has instructed his ministry
and the central bank to make preparations for the implementation
of the CBS.

"The government always wants to maintain a good relationship
with the IMF," Mar'ie added.

Meanwhile, vice presidential candidate B.J. Habibie said no
decision had yet been taken to fix the rupiah through the use of
a currency board.

"The decision about a fixed currency has not been taken. That
would only be an emergency break in case speculation against the
rupiah continued," Habibie told Der Spiegel magazine in an
interview published in Bonn yesterday.

According to a summary text of the interview, as quoted by
AFP, Habibie, currently Indonesia's research and technology
minister, said he believed a more likely course was that Jakarta
would retain floating rates while reforming its financial market
system.

The IMF and United States held their ground Thursday in a
high-stakes showdown with President Soeharto, saying it was
premature to put a rigid currency board in place for the
beleaguered rupiah.

The IMF said in Washington that its position had in no way
changed from last week.

But in a sign the international lending agency may be more
flexible in the months ahead, the IMF said the controversial
currency plan could be considered once certain conditions were
met by Jakarta.

"It is premature to install a currency board now," an IMF
spokesman said in a statement as quoted by Reuters.

Once banking reform, corporate debt and other economic issues
are addressed, "one could reconsider whether a currency board
would be necessary or desirable," the spokesman added.

The Clinton administration, backing up the IMF in the dispute,
told Soeharto to stick to the economic reforms prescribed by the
fund.

"Once those sort of issues are dealt with you can decide: Does
a currency board make sense or not? I'm not suggesting that it
does in these circumstances," U.S. Treasury Secretary Robert
Rubin told reporters in Washington.

The currency board plan also has come under fire from the
European Union which has said the economic conditions in
Indonesia are not ripe for such a move as it could aggravate
market instability.

There has, however, been speculation in financial markets that
the IMF and Indonesia might reach a compromise on the
controversial issue.

German Finance Minister Theo Waigel said Wednesday after he
met with the Indonesian leader that Soeharto has promised to
rethink the currency board proposal.

"Indonesia is so determined. I think there will have to be a
compromise with some version of a currency board," said Barry
Bosworth, an economist at Washington's Brookings Institution.

In Washington, a senior U.S. Treasury official said the G-7
has agreed that implementing a currency board would not provide a
quick fix to the nation's economic woes and that a steadfast
commitment to reforms is what is necessary. (08)