Indonesia Announces New Reform Package

The Indonesian government Wednesday announced a revised reform package designed to pull the world’s fourth most populous nation out of its worst economic crisis in 30 years.

Indonesia’s top economic minister, Ginandjar Kartasasmita, said talks with the International Monetary Fund on how to restart a $43-billion rescue plan ended early today with a new agreement.

The bailout was first cobbled together in October, then revised in January when the economy deteriorated dramatically. It broke down again in February when the IMF complained that President Suharto had failed to reform an economy dominated by his wealthy family and associates.

“We’re following through on all of the commitments,” Ginandjar said in a news conference at the presidential palace.

He said the new deal tackled an array of financial problems, including ways of overcoming the nation’s $70-billion private sector debt. Talks on that issue with at least 13 international banks are scheduled later this month in New York.

“It’s necessary for the government to get involved in the matter, but there’s no bailout from the government for the corporate debt,” Ginandjar said.

He said the new deal will help poor people by granting credits with lower interest rates to cooperatives. He said the government would maintain subsidies for rice and soybeans.

Earlier this year, Suharto argued that the IMF measures had failed to reverse Indonesia’s fortunes. He said the austerity measures had only inflicted misery on millions of struggling Indonesians and raised the potential for civil unrest.

The Indonesian currency, the rupiah, has fallen about 70% in value since the region’s financial crisis, which started in Thailand, hit Indonesia in July, bringing high inflation, company closures and unemployment.

In February, deadly riots broke out over rising prices, costing five people their lives. Student protests have also mounted.

Relations between Indonesia and the IMF deteriorated to the point last month where the lending agency withheld a $3-billion loan installment, pending the outcome of the latest negotiations.