IMF urged to swallow its own medicine




26th June, 2001

JAKARTA - The International Monetary Fund (IMF) should take over the Indonesia's US$80 billion debt that was incurred as a result of its bad advice on economic recovery measures, according to Jubilee Plusl.

The IMF played a bigger role in ruining the Indonesian economy than former president Suharto and his children, Ann Pettifor of Jubilee Plus, told the press. Jubilee Plus is an organization campaigning for the reduction of poor countries' debts.

Indonesia's economic crisis worsened mainly because the Washington-based financial body mistreated the country's banking sector, she said. Indonesia's economic crisis was triggered by the advice IMF officials gave the Indonesian government on November 1, 1997, she said.

At the time, the Indonesian government was instructed to close down 16 banks on short notice without proper preparations. As a result, the monetary crisis deepened and the country's total debt swelled to $150 billion, she said. Moreover, according to Pettifor, the IMF played its role in Indonesia in violation of the principles of the rule of law because it acted as "witness, plaintiff, judge, and jury in its own court". The Fund also made its decisions at its own descretion.

Pettifor said the IMF always wanted the countries that had sought its help to carry out free-market principles such as abolishing all forms of protection and government subsidies while the Fund itself was at the same time enjoying protection everywhere.

Therefore, she said, the Indonesian government should follow the example of Nigerian President Obasanjo who had called for an end to his country's trial by "a Kangaroo court". The Nigerian leader was referring to a situation in which the IMF was always acting as the innocent party while the blame for anything that went wrong in a country's economic recovery effort was always put on the government concerned. Obasanjo's attitude roused the sympathy of many countries in the world and as a result Nigeria won debt forgivennes from its creditors, she said.

Pettifor also said expenditures in Indonesia's annual state budget were unfair in composition as about $9 billion was spent on the servicing of the government's overseas and domestic debts. The amount meant each Indonesian citizen had to pay $45 a year, while they each were receiving only $2 worth of health services, she said.

Meanwhile, Indonesia's Coordinating Minister for Economic Affairs Burhanuddin Abdullah has said legislators will continue to discuss the amendment of the law governing Bank Indonesia, based on the government's new agreement with the IMF. "The amendment will proceed. The IMF did not ask that it be cancelled. It only proposed a postponement," Burhan said on the weekend.

The amendment will accommodate the government's new agreement with the IMF, he said.

Senior economic observer Muhammad Sadli said the IMF has asked the government to postpone the amendment of the central bank law by six months, promising that its review team would immediately come to Jakarta to continue talks with the government. "From a reliable source, I heard that the IMF had offered a new compromise by proposing [the six-month postponement]'," he said.

Burhan earlier said the government had likewise offered the IMF four options on the amendment of the central bank law. The IMF has made the issue a requirement in the review of the IMF Letter of Intent, upon which the disbursement of a $2.8 billion loan to Indonesia is hinged.

"We are still discussing the four options. The IMF also needs time to evaluate them. I don't know when it will give a response," Burhan said. However, he admitted that the government has yet to discuss the issue with lawmakers.

The closed-door meeting was also attended by Finance Minister Rizal Ramli, senior officials of the Indonesian Bank Restructuring Agency (IBRA), and Bank Indonesia senior deputy governor Anwar Nasution.

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