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)