IMF `wary' over new deal with Indonesia

INDONESIA agreed a new programme of emergency economic reforms with the International Monetary Fund (IMF) yesterday, but even before it was formally announced a senior IMF official expressed wariness about the Jakarta government's capacity to fulfil its promises.

"We have no assurance. We cannot have assurance, given history, that it will be done," Stanley Fischer, the IMF's first deputy managing director, said in Tokyo. "We have measures in place and if they are not implemented, the programme won't go ahead."

This will be the third time Jakarta has agreed to a set of reforms with the IMF, in return for financial assistance of more than $40bn (pounds 24bn) to restore its economy after the collapse of the Indonesian rupiah. The original deal, signed last November, was supplemented by another in January. In March, the two sides were in negotiations again after President Suharto said the programme violated Indonesia's constitution.

"The success of this agreement will be in the implementation, not in the signing," said Mr Fischer. "If the programme is not carried out we couldn't continue to disburse funds. It's not for us to go ahead `no matter what'."

The full details of the programme will be unveiled after its presentation to the IMF's executive board tomorrow but, IMF officials said, it will contain new measures for monitoring its implementation. Once the IMF's board has approved it, a balance of payments loan worth $3bn will be released.

In a retreat from its earlier position, the IMF has agreed to allow continuing subsidies of rice and soya beans, in response to Indonesian fears of social unrest caused by rising food prices. The price of fuel and electricity will be allowed to rise gradually and the government will stop granting monopoly privileges, a controversial practice which has greatly enriched members of President Suharto's family.

Meanwhile, the IMF added its voice to calls for large tax cuts in Japan, to stimulate domestic spending and thus revive the Japanese market for goods from struggling Asian economies. A fortnight ago, Japan announced the outlines of a 16 trillion yen stimulus package. Today Ryutaro Hashimoto, Japan's prime minister, is expected to convene a committee which will lay the ground for tax changes as part of that programme. "There is a good case for tax cuts, and they should be substantial, the greater part of any package," Mr Fischer said in Tokyo.

Mr Fischer's remarks come as Japan struggles to jump-start an economy that has seen consumer spending collapse after three tax hikes last year. Japanese business leaders, stock investors and now the IMF are calling for Mr Hashimoto to reconsider his commitment to slashing government spending.

If Japan does not get its economic house in order soon, its problems could worsen, and even stall a recovery in other Asian nations, Mr Fischer said.

Start your day with The Independent, sign up for daily news emails
News
Keith Fraser says we should give Isis sympathises free flights to join Isis (AFP)
news
Life and Style
Google celebrates the 126th anniversary of the Eiffel Tower opening its doors to the public for the first time
techGoogle celebrates Paris's iconic landmark, which opened to the public 126 years ago today
News
Cleopatra the tortoise suffers from a painful disease that causes her shell to disintegrate; her new prosthetic one has been custom-made for her using 3D printing technology
newsCleopatra had been suffering from 'pyramiding'
News
people
Arts and Entertainment
Coachella and Lollapalooza festivals have both listed the selfie stick devices as “prohibited items”
music
Sport
Nigel Owens was targeted on Twitter because of his sexuality during the Six Nations finale between England and France earlier this month
rugbyReferee Nigel Owens on coming out, and homophobic Twitter abuse
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Ashdown Group: Trainee Consultant - Surrey/ South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Recruitment Genius: Client Services Assistant

£18000 - £20000 per annum: Recruitment Genius: A Client Services Assistant is ...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Day In a Page

No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor