Soeharto will pursue reforms: IMF

JAKARTA (JP): The International Monetary Fund (IMF) expressed confidence yesterday that President Soeharto would accelerate economic reforms to restore confidence in the economy.

IMF first deputy managing director Stanley Fischer said after a 90-minute talk with Soeharto that he had a "very, very good" meeting with the President on efforts to haul Indonesia out of its financial crisis.

Fischer said the President was determined to intensify the reforms agreed with the IMF in return for a US$40 billion bailout.

"The President was very clear in his determination to stay with the program and to strengthen and to accelerate it. There was no ambiguity in anything he said," Fischer told journalists after meeting with Soeharto at his residence on Jl. Cendana, Central Jakarta.

Fischer arrived here Sunday as financial markets and Indonesia's main creditors sought firm action rather than mere promises that the government would stick to the terms of the IMF bailout package.

Minister/State Secretary Moerdiono said Soeharto was very satisfied with the results of the meeting.

Moerdiono said there were no basic differences of views between the IMF and the government. The only difference was on the timing of the reforms to be taken.

"The President is confident that his next meeting with IMF Managing Director Michel Camdessus will also be fruitful," he said.

Camdessus is expected to arrive here tomorrow.

Minister of Finance Mar'ie Muhammad also praised yesterday's meeting as satisfactory.

"We will soon follow up the meeting with further negotiations with IMF officials," Mar'ie said.

However, Fischer warned that one could never be absolutely sure the government could turn confidence around in a short time.

"But I think the critical steps will be taken soon. That should, or begin to, restore confidence," he said.

He said he would like to see the government show in a few days its commitment to carry out the program and to undertake a variety of measures that could restore confidence in the economy.

"The confidence of Indonesian people and the confidence of outside investors in Indonesia depends on how the government of Indonesia treats the economy, and that depends on what it does in the budget and other commitments it has made," he said.

When asked about the draft state budget, Fischer said, "I think it has to be made more specific, the assumptions have to be spelled out."

The 1998/1999 State Budget is projected to balance at Rp 133.49 trillion ($15.5 billion), a 32 percent increase from the current budget of Rp 101.08 trillion.

State Minister of National Development Planning Ginandjar Kartasasmita defended yesterday the assumptions used by the government in drafting the state budget.

The assumptions include the rupiah's exchange rate stabilizing to 4,000 to the U.S. dollar, an economic growth rate of 4 percent, an inflation rate of 9 percent and average crude oil price of $17 per barrel.

Ginandjar said that even though the 1998/1999 budget followed the principle of a balanced budget, it opened the possibility for the government to achieve a surplus equivalent to 1 percent of the gross domestic product as required by the IMF.

The possibility of achieving the surplus would be from removing the fuel subsidies of over Rp 10 trillion, increasing revenue from taxes and reducing spending.

"However, it will still be discussed with the IMF whether it is realistic to pursue the 1 percent surplus in this current economic situation," Ginandjar said.

Many analysts have blamed the announcement of the draft state budget, which they described as unrealistic, for worsening Indonesia's financial crisis last week, when the rupiah plunged to an all-time low of 10,000 to the dollar.

Bank Indonesia Governor J. Soedradjad Djiwandono criticized analysts' view on the budget as unfair as they did not see the real value of the budget in dollar terms.

He said although the budget would rise 32 percent in terms of rupiah, it would not increase in terms of dollars. (prb/rid)

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