RI should join IMF postprogram monitoring

RI should join IMF postprogram monitoring

The Jakarta Post, Jakarta

The most feasible and realistic option for the government is to
join the International Monetary Fund (IMF)'s post-program
monitoring when the current economic bailout program expires at
the end of this year, an expert said.

Centre for Strategic and International Studies (CSIS)
economist Tubagus Feridhanusetyawan told The Jakarta Post on
Thursday that the move would help secure much-needed confidence
from investors in the government's economic reform program, while
also helping prevent a backlash from those opposing the existing
role of the IMF.

"There are only three choices available for the government;
dropping out (of the IMF) completely, extending the current
program, or joining the IMF's post-program monitoring.

"As the first and second are difficult to execute given the
financing and political issues respectively, the third option
would be the feasible one," he said.

The program, available for any member of the IMF who has
undergone the Fund's special program, means that the multilateral
agency would only monitor and supervise the economic reform
programs designed and conducted by the government, but with non-
binding commitments.

After more than three years of working together, the IMF's
current economic reform program will end later this year. Signed
in 1999, the agreement allows the country to access some $5
billion in loans, in return for meeting of a number of key
economic reform targets.

The government has not yet officially decided whether to
terminate or extend the program. However, a special team has been
set up, to explore and figure out options the government could
take if the current role does end as scheduled.

To completely drop out of the IMF would not be a wise option
as the cash-scrapped government would have to deal with lack of
financing sources.

Analysts have predicted that without the IMF, in 2004 alone
Indonesia would lose potential debt relief facilities amounting
to about $3 billion, which would otherwise be available from the
Paris Club if the IMF's role were maintained.

But extending the current IMF program would be a politically
difficult choice amid strong opposition against the increasingly
dominating influence of the Fund in the country's economic
affairs.

Based on that, Tubagus predicted that the government would
take the third option, to strike a balance between those wanting
an end to the IMF's role and those wanting otherwise.

His remarks followed earlier calls voicing a similar
suggestion.

On Wednesday, a group of economists also stressed the need for
Indonesia to continue its role with the IMF but with
modifications.

While the IMF is still needed to bolster market confidence in
the government economic reform program, its role should be
limited only to supervising and monitoring.

The IMF should focus on monitoring the country's monetary and
other macro-economics indicators, but not getting too involved in
the micro-economics.

Nevertheless, Tubagus added, the most important thing for the
government to be able to secure the confidence was to draw up a
credible economic reform program and then show persistent efforts
to implement it.