SE Asian bank governors ask IMF to be more flexible

SE Asian bank governors ask IMF to be more flexible

BALI (AFP): Southeast Asian central bank governors urged the
International Monetary Fund (IMF) Saturday to be more flexible in
imposing conditions for bailouts and other aid to economies
troubled by the region's currency crisis.

They conveyed the proposal through the region's representative
in the IMF, Zamani Abdul Ghani, the fund's executive director, at
a closed-door meeting on the second and final day of the 33rd
Conference of the Governors of Southeast Asian Central Banks
(SEACEN) here.

Bank Indonesia (central bank) Governor J. Soedradjad
Djiwandono told journalists that although the IMF had already
shown some flexibility, it might not be enough for the troubled
economies to cope with, for instance, exchange rate volatility.

"I think the IMF has been showing a little bit more
flexibility but whether that flexibility is enough to face the
very dynamic situation right now we are experiencing is part of
the question," Djiwandono said.

The IMF has put together almost US$120 billion in bailout
packages for Thailand, Indonesia and South Korea -- the nations
worst affected by financial turmoil and other economic woes
following an erosion in their currencies' strength against the
U.S. dollar.

The Philippines is preparing to exit from over three decades
of IMF supervision this year but will then enter into another
agreement with the IMF, which is also being consulted by Malaysia
in carrying out its own economic reforms.

Djiwandono, who chaired the talks, stressed that the economies
were committed to implementing the programs prescribed by the IMF
"but sometimes there are problems on how to implement them
consistently partly because of the dynamics of the situation."

He cited Indonesia's dilemma in taming rupiah volatility as an
example.

"The (question is) whether you want to deal with it like what
the textbooks say -- try squeezing liquidity and, if so, by how
much and how long a period?

"At the same time, how do we have to take care of the real
sector and the banking sector, which is in distress right now.
These are the problems of implementation," Djiwandono said.

As the Southeast Asian central bankers were meeting in Bali,
IMF Managing Director Michel Camdessus said in Washington on
Friday that Indonesia must implement further economic reforms
before considering creation of a special currency board to ensure
the stability of its rupiah.

Camdessus, in a speech at the U.S. State Department,
nonetheless agreed that a currency board might be helpful in the
future. But "we are of the strong view this moment has not yet
come in Indonesia," he added.

Indonesian authorities have said they want to create the
currency board to stabilize the rupiah against the dollar.
Analysts in Jakarta have said the move would peg the rupiah
between 5,000 and 6,000 to the dollar.

The currency in trading Friday plunged to 8,200 to the dollar
from 7,700 the day before and touched a low of 9,500 before
rebounding.

Djiwandono said the concept and implementation of programs
under the IMF bailout packages "are not always synchronized." He
did not elaborate.

The IMF recently agreed to allow Thailand to run a smaller
budget surplus than originally mandated, and perhaps even a
budget deficit after conceding that its 17.2 billion dollar
bailout package for Thailand had proved too austere, reports
said.

The revised budget target appeared to have vindicated critics
of IMF bailout programs.

On Friday, the governors opened talks with a plea to the Group
of Seven (G7) industrial nations to help their countries overcome
financial turmoil.

SEACEN includes Indonesia, Malaysia, the Philippines,
Singapore, Thailand and Myanmar, as well as Taiwan, South Korea,
Nepal and Sri Lanka.

Cambodia, Fiji and Tonga were attending as observers of
SEACEN, which plays a key role for training and research among
central bankers in the region.