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To: John J H Kim who wrote (380)	2/18/1998 1:59:00 PM
From: dppl	Respond to of 947

You're probably right but the IMF is asking political questions now, as well as economic questions, and I think they, the EU and the US, don't like what they see. DPPL

To: John J H Kim who wrote (380)	2/18/1998 8:27:00 PM
From: Duke	Read Replies (3) \| Respond to of 947

Indonesia's Suharto stirs confusion in world mkts By Jeff Coelho NEW YORK, Feb 18 (Reuters) - Indonesia's long-standing leader has perplexed world capital markets -- again. International investors have gotten used to pondering President Suharto's health, political future or fiscal policy. Now, analysts said, they are baffled over whether he will implement a currency board to stabilize his country's sick economy. ''It is in fact confusing seeing the mixed signals coming out from Indonesia,'' said Feroz Talyarkhan, managing director of Asian fixed income research at Bear Stearns and Co. After hinting Indonesia would implement a foreign exchange peg despite overwhelming international criticism, Suharto on Wednesday reportedly backed away from that controversial option. German Finance Minister Theo Waigel emerged from a Wednesday meeting with Suharto saying that the president vowed to ''rethink'' the fixed exchanged rate plan, which would peg the battered rupiah currency to a more stable currency, such as the U.S. dollar. A Singapore newspaper reported on Wednesday that Jakarta had decided to discreetly jettison the plan, and place it before debate in Congress following general elections in March. These developments contrasted sharply with Tuesday's news when Suharto sacked his central bank governor, Soedradjad Djiwandono, who had reportedly opposed the plan. ''It's hard to see Suharto caving in publicly on the currency board three weeks before the election, but Waigel's comments do add credence to the reports that the currency board plans may be put on the back burner for a while,'' said Roger Francis, senior analyst at IBJ International in London. The plan for a fixed exchange rate system has come under heavy criticism from the International Monetary Fund (IMF), the European Union and the United States, who have said current economic conditions in Indonesia were not ripe for such a move. The IMF signaled that a $43 billion IMF-sponsored rescue package might be in jeopardy should Jakarta adopt the plan, but analysts said they doubted the Fund would cut off dialogue with Indonesia. ''This will not be a cold war between the IMF and Indonesia,'' said Thomas Trebat, head of emerging markets research at Citicorp Securities in New York. ''If Indonesia does go ahead, which I don't think they will, you will have a period of strained relations but dialogue going on.'' Nonetheless, Indonesia's muteness on the issue has thrown the financial markets into a state of confusion. The Indonesian economy has been rattled by rising consumer prices, an increase in unemployment and a currency that has tumbled about 70 percent against the U.S. dollar since July. The Indonesian rupiah firmed slightly against the U.S. dollar Wednesday on the assumption that the idea of a currency board might be dropped. It stood at 8,850/9,150 against the dollar in New York trading. Scattered riots have broken out in different areas of the huge archipelago of 200 million people in recent weeks over the economic pains. With a severe slump in the economy, analysts have been mulling what Suharto was up to. Talyarkhan said the former military general might ''be playing a dangerous game of trying to extract from the IMF certain concessions in exchange for backing off from the currency board.'' But Citicorp's Trebat said Suharto probably views the IMF as part of a solution rather than an international threat. ''It is not a ploy,'' Trebat said, referring to Suharto's recent motions to establish a currency board. ''It is honestly an effort by Indonesian corporations who are not viable at an exchange rate of 10,000 rupiah or 15,000 to the dollar.''

To: John J H Kim who wrote (380)	2/18/1998 9:08:00 PM
From: dppl	Respond to of 947

As a follow up to my last post, here is what I mean by the political edge of the IMF these days. Seems pretty clear here: Wednesday February 18, 8:08 pm Eastern Time Former Fed governor slams Indonesia currency board WASHINGTON, Feb 18 (Reuters) - A former Federal Reserve Board governor said on Wednesday Indonesia lacked the credibility to successfully implement a fixed exchange rate system like a currency board. Lawrence Lindsey, who left the Fed a year ago, told reporters that President Suharto effectively eliminated Indonesia's central bank Tuesday when he dismissed its governor, who opposed the fixed exchange rate system. ''They have no central bank. They just fired their central bank governor,'' Lindsey said. ''This is not a credible government.'' Lindsey added that he does not oppose a fixed exchange rate system in theory, but that ''it's a last desperate way'' and it would only work ''if you have credible institutions in place.'' The IMF has condemned Suharto's plan to fix value of the rupiah and has threatened to freeze its $43 billion rescue package unless Indonesia abandons the proposal. Lindsey, however, did not take sides with the IMF, whose policies he has vocally opposed for years. He blasted the IMF for getting involved in what he termed ''Asia's banking crisis,'' a matter which he said should be privately resolved between the debtors and creditors involved. ''I would say that the IMF in this situation is irrelevant,'' he said, adding that Indonesia was facing a solvency crisis. ''But if bankruptcy rules had been in place and had foreign investment been able to move in, plants would not have been shut down nearly as long.''