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Indonesia Riots May Slow Reforms

May 15, 1998

WASHINGTON (AP) _ The International Monetary Fund is concerned that deepening civil unrest in Indonesia could slow the country’s economic reforms and delay the return of investor confidence.

John Boorman, director of the IMF’s Policy Development and Review Department, said Friday it was too soon to talk about any further delays in IMF lending to Indonesia, whose capital, Jakarta, has been torn by rioting.

``We are anxious to see the reforms continue and we want to continue our support,″ he said.

But, he said, ``a lot of damage to investor confidence has clearly been done.″

As the Asian financial crisis hit last year, Indonesia’s currency, the rupiah, lost 70 percent of its value against the dollar and international investors began pulling money out of the world’s fourth most populous nation. The IMF stepped in with a $43 billion rescue package that included strict austerity measures.

Some analysts have tied the unrest to the IMF reform program, which included a provision that reduced or ended government subsidies on fuel and food products. Others have linked the wave of rioting and destruction to mounting pressure on President Suharto, Asia’s longest-serving ruler, to step down after 32 years in power.

IMF officials would not comment on the political situation or how they thought events would play out.

Also, they are not suggesting any major revisions in the IMF reform program even though they might have to be more flexible because of worsening conditions in the country.

Indonesian Energy Minister Kuntoro Mangkusubroto said Friday that Indonesia would roll back prices of various fuels following widespread protests over price increases announced last week under the IMF program.

The IMF’s executive board is due to meet June 6 to review another $1 billion outlay to Indonesia. Fund officials said that date could still be met or delayed a bit if conditions permit a review mission to return to the country within a week.

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