News Brief: Camdessus Welcomes Indonesia’s Measures
January 26, 1998
Camdessus Welcomes Indonesia’s Measures
Michel Camdessus, the Managing Director of the International Monetary Fund, welcomed the announcement today by the Indonesian government of a comprehensive program for the rehabilitation of the Indonesian banking sector, and a process to put in place a framework for creditors and debtors to deal, on a voluntary and case-by-case basis, with the external debt problems of Indonesian corporations.
Camdessus said: "These programs continue and extend the implementation of the reinforced set of economic reforms that were announced by President Suharto on January 15. A wide range of measures to eliminate structural distortions and restrictions has already been put in place before their committed date of February 1. In particular, all special privileges granted to the National Car Program have been eliminated; special funding for IPTN, the aircraft manufacturer has been rescinded; restrictive marketing arrangements have been abolished; domestic trade in agricultural products liberalized; and the BULOG monopoly restricted solely to rice. Also, a revised budget was submitted to Parliament.
"To prevent the further erosion of confidence in the banking system, which has been under severe pressure in light of the extraordinary depreciation of the rupiah, the government has decided that from today it will guarantee the obligations of depositors and creditors. At the same time, the government is moving decisively to resolve the underlying financial difficulties of the banking system by establishing the Indonesian Bank Restructuring Agency (IBRA) that will be given broad powers to restructure all financially weak banks.
"As the exchange rate has depreciated excessively, many corporations have found it increasingly difficult to service their external debt. To restore orderly debtor-creditor relations, a private initiative is underway to put in place a framework for negotiations between individual creditors and debtors to work out viable debt restructuring arrangements on a voluntary and case-by-case basis. Agreements under this framework would not involve funds from the public sector. In addition, action to strengthen bankruptcy procedures would support effective solutions.
"It is my conviction that the new measures will be implemented effectively and will
contribute to a resolution of Indonesia’s present crisis," Camdessus said.