News Brief: Camdessus Commends Indonesian Actions
October 31, 1997
Camdessus Commends Indonesian Actions
Michel Camdessus, the Managing Director of the International Monetary Fund (IMF), said "the Indonesian authorities have today introduced an impressive program of macroeconomic adjustment and structural reform. I strongly commend the actions taken by the authorities and the strength of the commitments they have made in this program, which has made the decision to lend support to their efforts an easy one. These measures should restore confidence in the Indonesian economy and contribute to the stabilization of regional financial markets.
"The program is based, in the first instance, on strong monetary and fiscal policies, designed to bring about an orderly adjustment in the economy and to restore confidence to financial markets. The second leg of the program consists of a major restructuring of the financial sector, along with measures to ensure its future soundness. The third leg involves significant deregulation measures and trade reforms that should have an immediate and long-lasting effect in improving economic efficiency. Simultaneous efforts to promote transparency and openness will significantly improve the governance framework and the business climate.
"On November 5, under the emergency financing mechanism, and in view of the major improvements that this program is designed to bring about in the longer-term prospects of the Indonesian economy, I will be asking the Executive Board to approve Indonesia’s request for a three-year stand-by arrangement in the amount of about US$10 billion (SDR 7.3 billion). In addition to the IMF funding, the reform program will besupported by substantial financing from the World Bank and the Asian Development Bank, which have made notable contributions to the design of the program, particularly in the field of financial sector rehabilitation and structural reform. These institutions intend to contribute to the program through technical assistance and loans, with financing amounting to US$4 ½ billion and US$3 ½ billion, respectively. In addition, taking account of other expected contributions to the financing package, including the use of part of Indonesia’s own substantial external assets, we arrive at a first line of financing of the order of US$23 billion. At the same time, a number of important economies (including at this stage Australia, China, Hong Kong SAR, Japan, Malaysia, Singapore, and the United States) have indicated that in the event that unanticipated adverse external circumstances create the need for additional resources to supplement Indonesia’s reserves and the resources made available by the IMF, they would be prepared to consider making available supplemental financing in support of Indonesia’s program with the IMF.
"After 30 years of sustained rapid growth and remarkable poverty reduction in Indonesia, this program ushers in ambitious reforms designed to equip Indonesia’s economy for the challenges and opportunities of globalization in the coming decades.
"I am confident that this program and the strong support for Indonesian reforms provided by the international community will be of great benefit for the people of Indonesia, particularly the poorest," Camdessus said.