Soeharto urges IMF to help stabilize rupiah

Soeharto urges IMF to help stabilize rupiah

JAKARTA (JP): President Soeharto yesterday called on the
International Monetary Fund (IMF), which has organized
Indonesia's US$43 billion rescue package, to do more to help
stabilize the rupiah which he says is key to solving the current
economic crisis.

Soeharto also raised publicly for the first time the question
of adopting a Currency Board System (CBS), in which the rupiah
would be set at a fixed foreign exchange rate. The proposal has
sparked heated debate among the country's economists and business
leaders.

"I'm carefully and cautiously contemplating the possible
adoption of a Currency Board System," he said in his during his
accountability speech delivered to the General Session of the
People's Consultative Assembly yesterday.

Soeharto has retained American economic professor Steve Hanke
to investigate the feasibility of a CBS in Indonesia. The system
is in use in Hong Kong, Bulgaria and Argentina.

Officials have hinted that the rupiah could be set at Rp 5,000
to the American dollar. To do this, the entire money supply must
be matched by dollar reserves. If successful, the system will
stabilize the rupiah exchange rate.

However, skeptics say that with public confidence in the
rupiah low, current foreign exchange reserves would be
insufficient to support the fixed exchange rate in the face of
expected massive demand for dollars.

The IMF and world leaders have cautioned Indonesia against
adopting a CBS at the present time.

"I shall not hesitate to do whatever is needed to overcome the
situation in order to alleviate the increasingly heavy burden of
people's lives," Soeharto said.

While vowing to pursue the sweeping economic reforms promised
to the IMF in return for massive loans, Soeharto said there were
no signs of improvement on the currency front.

"I do not see any improvement within the short period of
time," he said.

"This is the reason why I have asked the IMF and other heads
of government to assist us find a more appropriate alternative.

"I refer to the more appropriate course of action as IMF-
Plus."

Soeharto said he had been following the public debate on the
CBS with interest, describing the process as positive and
reflecting democracy at work.

However, differences of opinion should not be exaggerated and
used to sow confusion among the public, he said. "More than ever,
we must strive for unity to safely weather the current storm."
(emb)