Jakarta's stalled reforms frustrate IMF
By Colleen Ryan, Washington
The stand-off between the IMF and Indonesia could undermine efforts to
stem the financial turmoil in Asia if it were not resolved soon, the
IMF's managing director, Mr Michel Camdessus, warned yesterday.
Speaking at an IMF conference on liberalisation of international capital
flows, Mr Camdessus maintained a particularly hard line on Indonesia
commenting, in answer to questions, "We still believe that if this
problem is not resolved soon, the whole thing is at risk."
Mr Camdessus' remarks were made against the background of continued
strong support by the US Administration for the IMF's reform program.
The US ambassador to Indonesia, Mr J Stapleton Roy, has returned to
Washington for discussions following the apparently unsuccessful Jakarta
visit of presidential envoy Mr Walter Mondale last week.
The IMF was to have approved a second tranche of $US3 billion in
financial assistance to Indonesia next week but has delayed this until
next month at the earliest. Mr Camdessus confirmed the delay yesterday,
pointing to the absence of an Indonesian Cabinet with which to finalise
economic plans.
"It will take certainly until April until we are ready," Mr Camdessus
said, referring to IMF executive board action on further funding.
He added that a long list of structural measures was needed in Indonesia
under the reform program agreed with the IMF earlier this year.
Mr Camdessus emphasised that the issue of a currency board was not the
only matter causing problems.
"We are a little bit frustrated that the kind of diversion coming from
the debate on the surrealistic proposal of the currency board has in
some ways occupied too much the minds while important things have to be
done on issues like banking and restructuring corporate debt.
"I must say that particularly in view of the very high risk of human
suffering and the risk of ethnic strife . . . we want to do everything
possible to help this country."
Yesterday's conference in Washington was dominated by calls for changes
to the architecture of the international financial system.
However, while the speakers were agreed on the need for change they were
noticeably short on prescriptions for measures to improve the system.
Mr Larry Summers, deputy-secretary of the US Treasury, warned the
conference that: "We cannot leave ourselves to face the kind of dilemma
the world community faced [late last year] between chaos, confusion and
contagion on the one hand, and large bailouts on the other.
"We all need to look at the international financial system and do what
we can to change it so that we don't have crises of the kind we are now
experiencing or the kind we experienced in Mexico or the kind we
experience in the European exchange rate mechanism every three years."
The conference was called to discuss liberalisation of international
capital movements and, in particular, the expanded role of the IMF.
Last September, at the annual meeting of the IMF in Hong Kong, the board
of governors agreed that it was time to "add a new chapter to the
Bretton Woods agreement" and amend the IMF's articles of agreement to
make liberalisation of capital movements one of the purposes of the
fund.
Mr Camdessus addressed the issue of whether the perceived benefits of
free capital markets still made sense in the light of the Asian crisis.
He argued that the problems of Indonesia, Korea and Thailand arose not
because they had opened their capital accounts but because the countries
with the most open capital accounts in the region, Hong Kong and
Singapore, were among the most successful in dealing with the crisis.
"The difficulties arose from the macro-economic environment and
institutional setting in which they opened their capital accounts and
the way in which measures to open their capital accounts were sequenced
with other reforms," he said. |
