IMF: No policy stand-off with PDI-P

[Robert Weissman <rob@essential.org>]

Business Times [Singapore]/Bridge News
17 June 1999
IMF: No policy stand-off with PDI-P
Fund says Kwik's fixed rupiah plan will be discussed 'at proper time'
[SINGAPORE]
There is no policy clash between the IMF and the Indonesian Democratic
Party
of Struggle (PDI-P) over the party's chief economist Kwik Kian Gie's
proposal
for a fixed rupiah rate, Khadim al-Eyd, the International Monetary Fund's
senior resident representative in Jakarta, said yesterday.
In a phone interview, Mr Khadim dismissed market talk that a policy
stand-off
could develop between the IMF and PDI-P due to Mr Kwik's preference for a
fixed rupiah rate.
"The idea that there will be a confrontation between the PDI-P and the IMF
is
absolutely without basis or foundation," he said, adding that the IMF has
been in "close contact" with Mr Kwik.
"We see Megawati and her advisers regularly," he said, noting that a
discussion between PDI-P leaders and the IMF is scheduled this weekend.
The IMF's Asia-Pacific director Hubert Neiss will be in Jakarta today,
while
first deputy managing director Stanley Fischer will arrive tomorrow. Mr
Khadim said that the IMF "always discusses policies with its member
governments", and Mr Kwik's proposal for the fixed rupiah rate "will be
discussed at the proper time and in the proper context".
"We will discuss all issues and proposals as they relate to the economic
situation," he said, adding that the IMF would not "rule out" or "rule in"
Mr
Kwik's fixed exchange rate proposal.
The IMF reviews Indonesia's aid programme every two months. "The economic
situation changes rapidly, and whatever modifications are needed, the
programme will be modified accordingly," he said. Furthermore, the IMF is
well aware of Mr Kwik's views, so there are "no surprises", Mr Khadim said,
noting that the idea of the fixed rupiah rate is "not PDI-P's idea", but Mr
Kwik's opinion.
"Of course, we all have opinions, and (Kwik's is that) this is a good time
to
fix the exchange rate," he added.
Meanwhile, the IMF is "pleased" that the Indonesian elections have
concluded
peacefully, as this should help to boost the country's economic recovery,
Mr
Khadim said. However, he declined to comment on specific developments in
the
country's political arena.
There has been market speculation that PDI-P, which is currently leading in
the polls, may be on a collision course with the IMF due to the party's
bias
towards implementing a fixed exchange rate for the Indonesian rupiah.
With about a quarter of the votes counted, the PDI-P, led by Megawati
Sukarnoputri, is currently the front runner with about 34 per cent in the
country's first free parliamentary elections in more than four decades. The
Indonesian elections were held June 7.
Mr Kwik, tipped to be Indonesia's next finance minister if the PDI-P forms
the next government, has been a fierce proponent of a fixed rupiah rate
since
late 1997 and early 1998 when the Asian financial crisis broke.
Mr Kwik has expounded on those views in an article to the country's Kompas
newspaper, saying he is convinced that it is time to apply a fixed exchange
rate regime, accurately taking into account purchasing power parity.
He made similar comments in a televised debate on Sunday between key
economic
advisers, including Faisal Basri from the PAN party, and Fadel Mohamed,
vice-president of the chamber of commerce.