News Brief No. 98/10

News Brief: IMF Concludes Discussions with Indonesia

April 8, 1998

The following statement was made in Jakarta today by Hubert Neiss, Director of the International Monetary Fund’s (IMF) Asia and Pacific Department:

"Today the Indonesian Government team and the IMF team concluded the discussions on the first review of the stand-by arrangement approved by the IMF on November 5, 1997.

"The economic program agreed with the Government adapts macroeconomic policies to the deteriorated economic situation and expands the structural and banking reforms agreed on January 15, 1998. The main objectives of the program are to stabilize Indonesia’s financial situation and to establish the foundations for a resumption of economic growth.

"These objectives are to be achieved through the implementation of a comprehensive set of policies that have been formulated in close cooperation between the Indonesian Government, the Asian Development Bank, the World Bank, and the IMF. The main elements of the program are:

· A strong monetary policy to ensure stabilization of the rupiah.

· Effective control over the budget, with allowance for the temporary fall in economic growth and the need to subsidize basic commodities.

· Accelerated bank restructuring to ensure the efficient operation of the financial system.

· A comprehensive agenda of structural reforms to increase competition and efficiency in the economy, reinforcing the commitments made in January.

· Accelerated arrangements to develop a framework with foreign creditors to restore trade financing and to resolve the issues of corporate debt and interbank credit.

· The strengthening of the social safety net through support for small- and medium-sized enterprises and through public works programs.

"The credibility of the program depends on its full implementation which will be assured through:

· Daily monitoring by the Executive Committee of the Resilience Council, in close cooperation with the IMF, the World Bank and the Asian Development Bank.

· Substantive actions prior to approval of the program by the IMF Executive Board.

· Frequent program reviews by the IMF Executive Board.

"The program requires approval by IMF Management and submission for consideration by the IMF Executive Board in which the 182 member countries of the institution are represented. The Executive Board will review the program and make a determination on the next disbursement to Indonesia, after the agreed prior actions have been implemented. Several of these measures have already been put in place, while others are expected to be implemented shortly.

"The Government will shortly publish its Economic Memorandum which contains an outline of the economic program and specifies the complete set of policy commitments. Their resolute and sustained implementation should gradually restore market confidence and bring the Indonesian economy back to health," Neiss said.