Top economist backs IMF's continued role in Indonesia
Top economist backs IMF's continued role in Indonesia
The Jakarta Post, Jakarta
Adding weight to the prolonged debate over the International
Monetary Fund (IMF)'s role in the country, noted economists said
that Indonesia still needed the Fund to help ensure continued
confidence from creditors and investors in the country's economy.
Emil Salim, a respected economist at the University of
Indonesia, told reporters on Thursday Indonesia remained in need
of such a role as the country's credit rating remained poor.
"Our credit rating such as the one issued by S&P still hovers
at CCC (below investment grade).
"So, we need an (credible) institution that can provide a
guarantee ... Much like a reference, and such a reference is
currently given by the IMF," Emil said.
He added that the IMF was acting as an insurer for creditors
and investors, whenever Indonesia needed financial support,
either for debt rescheduling or asking for new loans. As such it
has proven to be crucial given the country's huge debts, Emil
added.
Currently, the country's sovereign debts stand at around
US$72.9 billion.
And to avoid being trapped by financial disaster, seeking debt
rescheduling would be of great importance for the country so that
it could maintain fiscal stability. According to Emil, it is for
this reason that the IMF's role was so critical.
For instance, the country's creditors grouped in the Paris
Club and London Club have so far been willing to grant Indonesia
debt rescheduling facilities, mostly because of the IMF.
"If we want to free ourselves from the IMF, please offer some
alternatives as to how to deal with this guarantee problem," Emil
said.
While the Paris Club applies to government-to-government
debts, the London Club refers to the government's debts owed to
international private creditors.
Emil's remarks constitute the latest twist in the long-
standing controversy over the IMF's role in the country.
Currently, Indonesia is entering the final year of the IMF-
sponsored economic reform program, which began in 1999. After
being extended for another year, the IMF assistance program is
scheduled for completion by the end of this year.
So far, the reaction over this has been mixed.
On one side, prominent figures -- including the outspoken
Minister for National Development Planning Kwik Kian Gie and the
People's Consultative Assembly Speaker Amin Rais, have insisted
that Indonesia would be better off without the IMF.
They have demanded the program be ended even before its
termination period as they claim it could at times be harmful to
the country's economy. Free from the Fund the country would be
more independent in determining its economic policies, they
argued.
On the other side, however, many economists, who have been
gaining more and more support lately, have voiced doubts that the
country could maintain its reform momentum without the IMF
closely watching its back.
It's been proven, even with the support of the IMF, the
country's key reform program has not always gone smoothly.
What's more important, however, it would be hard for the
government to convince its creditors and foreign investors that
it was still committed to continued economic reform.
Economist Muhammad Ikhsan earlier said foreign investors would
prefer the IMF's existence to monitor the implementation of
reform.
"With the IMF around, Indonesia would be more disciplined in
its reform implementation. That would give a boost to foreign
investors' confidence on the country," Muhammad has said.