LEAD: No capital controls planned, Wahid tells IMF chief

Asian Economic News, June 12, 2000

JAKARTA, June 5 Kyodo

(EDS: UPDATING WITH PRESS CONFERENCE BY KOEHLER)

Indonesian President Abdurrahman Wahid told the new head of the International Monetary Fund (IMF) on Monday his government does not plan to use capital controls to stop the plunge of the rupiah currency but is considering strengthening registration of currency flows in and out of the country.

"What we want is a registration as practiced in other countries such as the United States and Singapore," Wahid said at a news conference after meeting with IMF Managing Director Horst Koehler.

The president called for implementing fully an Indonesian law under which all outflows of 5 million rupiah (about $600) or more are reported to the central bank.

Against the dollar, the rupiah has fallen more than 1,400 below the government's target of 7,000 to the dollar over the past month. Many analysts blame political uncertainty for the plunge.

In a separate press conference, Koehler said Indonesia has to implement its economic reform program as agreed with the IMF in a "steady and visible" manner to strengthen the rupiah.

"The president and I agreed introduction of capital controls would be counterproductive...he feels that it would be a wrong decision," Koehler said.

Koehler said capital controls would only hinder the country's economic recovery, which has shown signs of growth over the past months.

He said, however, "a broader and sustained" growth at a higher rate is needed to eradicate poverty and create jobs.

Koehler said the prospect of higher growth being posted is present. "Issues such as capital controls should not get in the way," he warned.

He said Wahid had assured him the government economic team is united and acting cohesively under his leadership.

Last Friday, the IMF endorsed $372 million in loans to Indonesia, resuming its economic assistance to the country after a three-month suspension.

The IMF said its 24-member executive board approved the loans after reviewing Indonesia's performance in implementing economic reforms suggested by the IMF.

The loans will bring the IMF's total disbursement to Indonesia under a three-year, $5 billion aid package to $715 million.

The IMF in March suspended lending to Indonesia, judging the country had failed to achieve various reform targets set by the IMF.