Indonesia turns to IMF for financial rescue package

South-east Asia was facing a fresh financial crisis yesterday when Indonesia became the latest country to seek help from the IMF. It needs a rescue package to support a plunging currency and keep foreign reserves at a safe level. But the support is expected to be far lower than the $17bn organised for Thailand in August.

Indonesia's decision to go to the International Monetary Fund was endorsed by the country's President yesterday after a monthly economic cabinet meeting concluded outside help was essential to restore confidence in the nation's currency. The rupiah has lost over 33 per cent of its value against the US dollar since July and over half its value in the last year.

Indonesia's finance minister Mar'ie Muhammad said: "While Indonesia's foreign exchange reserves remain at a safe level ... nevertheless in order to safeguard the situation, the government is sounding out long-term support funds from international institutions including the IMF."

Indonesia's appeal for a rescue package was supported by Michel Camdessus, the IMF's managing director, who said: "The IMF strongly supports the approach that has been followed by Indonesia which sees this as an occasion to strengthen its economic policies even if fundamentals are basically sound."

Teams from the IMF, World Bank and Asian Development Bank will arrive in Jakarta at the weekend to open discussions on assistance. The IMF is hoping to accelerate the rescue programme by using the procedures of its Emergency Financing Mechanism.

Dennis de Tray, the chief representative of the World Bank, said of the Indonesia situation: "This is not a financial crisis. It is a crisis of confidence. It is possible that Indonesia will not have to draw on the [rescue] package at all if confidence is restored to the economy."

Analysts said IMF support would boost confidence in Indonesia and may make it easier to reduce interest rates without damaging the currency further.

But they said the size of the programme was likely to be far less than the $17.2bn (pounds 10.5bn) organised for Thailand. They said that because of its much healthier foreign reserves, Indonesia may receive only between $4bn and $6bn.

The rupiah has been in freefall since July, raising fears of widespread corporate defaults on a mountain of substantially unhedged private debt. The World Bank said a priority was to assess the scale of the Indonesia's short-term debt. The government is set to compile a list of all private loans outstanding.

Government leaders have warned of possible social unrest, remarks which political analysts said were triggered by the financial crisis and a drought.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
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

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee