RI urged to take IMF medicine

RI urged to take IMF medicine

LONDON (Agencies): Indonesia came under strong pressure from
the Group of Seven (G-7) leading industrial nations over the
weekend to carry out reforms stipulated under an IMF economic
rescue package and to shelve its fixed peg plan.

Although the final communique issued after a one-day summit of
G-7 financial leaders here on Saturday made no specific mention
of the economic turmoil in Indonesia, several finance ministers
took a tough line in press conferences after the meeting.

U.S. Treasury Secretary Robert Rubin said there had been
"extensive discussions" on Indonesia and "there was a unanimous
view amongst all seven of us" that Jakarta must carry out
"effective reform."

He pointedly praised South Korea and Thailand for implementing
"on a sustained basis" reforms aimed at restoring their battered
economies and said that Indonesia must implement the IMF program
is such a way that the markets believe in it.

The "crucial step" for Indonesia now is "sustained adherence
to the IMF program," Rubin said, but he warned that there would
have to be "wrenching changes" if the country was to emerge from
the crisis.

Other G-7 finance ministers also gave their unqualified
support to the IMF, which wants Indonesian President Soeharto to
implement tough reforms in exchange for a US$43 billion rescue
package.

Gordon Brown, the British finance minister said the G-7 was
calling on Jakarta to give up the idea of pegging its battered
currency to the U.S. dollar and to stick to the IMF medicine.

Soeharto, whose government faces widespread rioting over
prices, is threatening to introduce a currency board to prop up
the badly weakened rupiah, a measure the IMF says Indonesia is
not ready for.

Brown said the G-7 had stated its "support for the IMF view
that it is not the appropriate time for a currency board to be
established" in Indonesia.

"We were of the view that the Indonesian government must
implement the IMF program and that they must take the actions
necessary to strengthen their financial institutions," Brown told
reporters.

Investors fear that using scarce government resources to peg
the rupiah to the dollar could interfere with other essential
objectives, such as growth, reasonable interest rates and
employment stability.

IMF Managing Director Michel Camdessus warned last week that
the $43 billion IMF-arranged rescue package for Indonesia could
be jeopardized if Soeharto went ahead and established the
currency board.

Brown said that the G-7 countries -- the United States, Japan,
Germany, France, Britain, Italy and Canada -- viewed the reform
measures as "part of the conditions necessary that had to be met
for a restoration in confidence" in Indonesia.

German Finance Minister Theo Waigel also hammered home the
same message.

Indonesia can overcome its economic crisis if proposed IMF
reforms are "strictly applied," said Waigel, speaking to
reporters after the end of a one-day meeting of the G-7 finance
ministers and central bank governors.

The finance minister, who was returning from a tour of Asia,
praised South Korea and Thailand's reform efforts but said that
new turmoil in Indonesia could not be ruled out if Jakarta did
not get its economy under control.

Waigel said he had told the G-7 that the overall impression he
had gained during his trip was that Korea and Thailand were now
seeing positive developments.

"But the situation is different in Indonesia," he said.

He repeated that Indonesia's plans to set up a currency board
-- linking its currency the rupiah to a major currency such as
the dollar -- had created concern.

CBS -- Page 4

Confusion -- Page 12