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.