Resignation Viewed as Not Enough to Restart Aid Flow

President Suharto’s resignation may be a major step toward reducing the political turmoil in Indonesia, but it will not by itself keep international money flowing into that financially troubled country, U.S. and International Monetary Fund officials said Wednesday.

Further disbursements of the $43-billion economic rescue package that the IMF has assembled to help Indonesia get back on its feet will depend on who is running the new government that replaces the Suharto regime and on what kind of economic reforms the new leaders are willing to make.

The 182-country IMF provided a $1-billion installment for Indonesia two weeks ago and had been expected to approve another $1-billion payment in early June, following a review by the organization’s staff on how well Jakarta was carrying out the reforms that it promised.

IMF officials had said earlier, before Suharto’s resignation, that in view of the past few days’ political unrest, it was unlikely that the organization’s executive board would be able to act on the second installment, hinting that the loan program would be suspended until the turmoil was over.

Officials said that although Suharto has now stepped down, the IMF--as well as other potential lenders, such as the United States--would need more information to make their decisions, meeting with the new government to see what its policies would be.

An IMF team, which was evacuated from Jakarta when the rioting began, has been poised to return to the Indonesian capital at a moment’s notice, but officials said that probably would require approval from the organization’s board of directors. The team would need several days to negotiate a new loan program.

Stanley Fischer, the IMF’s No. 2 official, told reporters Wednesday that, if the two sides worked out a new accord soon, it was likely that Indonesia would be able to get by with an economic reform program similar to the one that has been in place for the past few weeks.

But he warned that the longer it takes to put the program back on track, the more difficult it will be for Indonesia to catch up. The Indonesian economy has been racked by runaway inflation and economic recession. The country’s currency, the rupiah, has continued to slide.

IMF officials have rejected complaints by critics that the organization’s tough prescriptions for reform helped spark political unrest in Indonesia. Fischer said Wednesday that on many measures, such as increasing gasoline prices, Suharto went further than the IMF had sought.

The IMF had been scheduled to provide a $3-billion installment to Indonesia on March 15 but withheld the money after Suharto reneged on promises to overhaul the economy. On May 5, the IMF announced that it would go ahead with the disbursement but would spread the payments over three months.

The reforms that the IMF has demanded of Indonesia include tighter regulation of its banking system, restructuring corporate debt, ending subsidies to special interest groups and eliminating monopolies, some of which are held by Suharto’s family.

The program also includes a plan to keep money and credit policies stable in hopes of strengthening the rupiah. The currency has fallen by more than 70% since Indonesia’s financial crisis began last summer.

The Clinton administration has adopted a two-pronged policy on Indonesia, urging reform on one hand while calling for continued international lending to Jakarta to help revive the nation’s economy.

The IMF and U.S. Treasury declined comment on Suharto’s resignation, though officials said it was likely that both would begin trying to contact the new government’s economic policymakers.