Indonesia agrees to implement IMF package

There is now nothing, from all indications, to deter the IMF from releasing the first installment ($3 billion) of the $43 billion bailout package it had promised Indonesia, mired in the worst economic crisis it has seen in decades. But this can only be done after the IMF board has approved the decision.

The IMF on its part issued a statement today saying that the new agreement would be closely monitored to ensure compliance. According to Ginandjar, the economy is expected to shrink by four percent over the current fiscal year, a morerealistic estimate compared to the zero per cent projected earlier. Inflation is to hover around 17 per cent.Food subsidies will remain intact, and will be phased out in a few months. However, fuel and power prices will be raised in a gradual manner. The budgeted oil price of $14.50 a barrel would be raised to $17. Another important concession made by the Indonesian government is the admission that budget deficit would amount to 1 percent of GDP, as compared to the 3.2 per cent projected earlier. The government has also given a commitment to the IMF that it will not bail-out or subsidise corporate foreign debt. It has promised to stop granting monopoly privilges — a revolutionary step considering how deeply entrenched the politics of patronage is. As a conciliatory gesture, the Suharto regime has agreed to sell stakes in five listed companies, and float seven state-owned firms in current fiscal year, and take the first steps to set a new bankruptcy law in motion.