JAKARTA, March 3: The United States told Indonesia's president Suharto on Tuesday he had to vigorously implement reforms prescribed by the International Monetary Fund to pull the nation out of a debilitating economic crisis.President Bill Clinton's special envoy, former vice president Walter Mondale, said he had told Suharto there was no other way to resolve the problem and no "quick fixes". Japan also said Indonesia should be careful about implementing radical new policies."I do not like to comment on the policy of the other country... but it is very important when you implement certain programmes you investigate the feasibility," vice finance minister for international affairs Eisuke Sakakibara told reporters in Kuala Lumpur, Malaysia.
He was responding to questions about whether Tokyo would accept an Indonesian proposal to establish a currency board, under which the faltering rupiah would be fixed to a single rate against a major currency like the US dollar and matched by foreign exchangereserves.
Mondale was more direct regarding the currency board idea."That came up," he told reporters after his 100-minute meeting with Suharto. "It's our view that the way to deal with the severe currency problems here is to deal with the underlying forces that are driving the rupiah toward its weakness."And that that is the way to do it, and there are not quick fixes that provide an alternative.
"Suharto said on Sunday he was committed to reforms agreed with the IMF in exchange for a bail-out package in excess of $40 billion. But he added the reforms had not helped revive the rupiah and he was considering additional measures, including a currency board.
The rupiah remained stable at around 8,830/8,930 to the dollar, but stocks climbed nearly four per cent on Tuesday on firmer sentiment over government attempts to stabilise the Indonesian economy. Stocks rose nearly three per cent on Monday.
The IMF and western nations that contributed to the bail-out package say Indonesia's limited foreign exchangereserves and weak banking system will make it impossible to withstand the inevitable attack on any rate to which the rupiah is pegged.Mondale said he emphasised president Clinton's judgement that "the central step for restoring confidence is full, demonstrable and vigorous implementation of IMF reforms."It is this that offers the best prospect for restoring financial stability and economic growth in Indonesia. It's worked in other countries, it's worked in the past here and it will work again if put in place and fully implemented.
"Indonesian state secretary Murdiono, who was present at the meeting, later told reporters that Jakarta's main concern was a stable and acceptable level for the rupiah currency.
"He (Suharto) explained to Mondale that the problem we are facing is that the rupiah is still weak and there are no convincing signals that it will strengthen in the short-term," Murdiono said.
The rupiah has fallen more than 70 per cent since July, sending a shock-wave through the rest of the economy.Most of the country's companies are technically bankrupt because of huge overseas debt, inflation is at the highest levels in about three decades and a sharp rise in unemployment is likely.
It is the worst crisis in Indonesia since widespread financial turmoil in the mid-1960s led to the ouster of founding president Sukarno and helped propel Suharto to power.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
