Clinton, IMF intervene in Indonesia crisis

WASHINGTON, January 9: As the Indonesia rupiah today fell to 10,550 to the dollar - a 70 per cent devaluation since the asian currency crisi...

WASHINGTON, January 9: As the Indonesia rupiah today fell to 10,550 to the dollar – a 70 per cent devaluation since the asian currency crisis started – US president Bill Clinton promised help to Indonesian President Suharto if he abided by the IMF’s terms he has been flouting.

Clinton spoke to Suharto yesterday for 25 minutes from Air Force One amid a panicky situation in Indonesia with citizens hoarding food and rumours of the military wanting Suharto not to seek a new term.

The IMF, which had mobilised a 43-billion-dollar bailout on tough terms, decided to immediately send an expert team to Jakarta to be followed later by official Stanley Fischer and International Monetary Fund managing director Michel Camdessus. The US treasury is also sending deputy treasury secretary Lawrence Summers, former chief economist of the World Bank, to study the situation.

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Suharto had agreed to abide by IMF terms but his actions have been the opposite, the Wall Street Journal said.

It said some advisers were reportedly telling him to confront the IMF to ease its terms and that he could proclaim a moratorium on foreign debt repayments due from Indonesian companies. Defiance of the IMF could prove popular but only if Suharto won aid on his terms, it added.

The International Monetary Fund wanted Indonesia to announce an austerity budget, with one per cent surplus and severe cuts in expenditure but Suharto announced a budget that increased spending of rupiah by 32 per cent, the journal said.

It said many of the austerity measures would hurt his children.

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Indonesia did close 16 insolvent banks as demanded by the International Monetary Fund but Suharto’s son Bambang Trihatmodjo thwarted the closure of his Bank Andromedia, and within a month was allowed to buy the licence of an inactive bank and reopen Andromedia under a different sign, it added.

In another case, Suharto allowed a family-connected power project to go ahead despite IMF advice to the contrary. Critics charge, said the journal, that it got a green light due to lobbying by Suharto’s daughter Siti Hardjanti Rukmana.

Austerity had also not affected a "national car" project that awarded big tax breaks to Suharto’s youngest son, Hutomo Mandala Putra said the journal, and Indonesian banks were pressed to pledge 690 million dollars for an assembly plant.

Of the 43 billion dollars pledged to bail out Indonesia, only three billion dollars have been made available so far with the US and International Monetary Fund insisting on compliance to the IMF terms to dole out the rest in installments.

Singapore market tumbles

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Fears that Indonesia might declare a debt moratorium sent shockwaves throughout Singapore stock markets on Friday morning, dealers said. The Straits Times Industrials (STI) index tumbled more than eight per cent to a low of 1,162.99 before pulling out of its dive to end the morning session at 1,193.26, down 6.09 per cent, or 77.44 points. "There is this fear that the Indonesian situation could worsen and affect Singapore. People are getting out of the stock market," said a dealer with a local house.

Singapore’s close economic ties with ailing Indonesia have been the root of the rapid falls in Singapore stocks this week. Dealers said investors continued to pull out funds from Indonesian-linked companies like Asia Food & Properties, Van der Horst and Samudera Shipping as well as local firms with high Indonesian exposure.