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The IMF Predicament

The IMF Predicament

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Published by Yanuar Nugroho

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Categories:Types, Research
Published by: Yanuar Nugroho on Aug 01, 2008
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06/15/2009

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The Jakarta Post, 27 May 2002 – Opinion & Editorial
The IMF predicament
Yanuar Nugroho
Researcher & General Secretary at
Uni Sosial Demokrat 
, Jakartayanuar-n@unisosdem.org It has been 5 years since the first intervention of the IMF in Indonesia in October 1997. Based on itsprescription the structural adjustment program (SAP) devised to assist Indonesia in its recovery fromthe severe economic crises, the IMF has dictated its policies to the government using the sacred vowsof the Letter of Intent (LoI) and Memorandum of Economic & Financial Policy.However, both the prescription and the mantras do not seem to be working properly. Indonesia isfurther trapped into deeper debt. Worse still, under the SAP, which introduced policies like importliberalisation, free money regime, devaluation, monetary & fiscal contraction and foreign investment,the Neo-Liberal economics has flushed away local economies by minimising government’s roles,facilitating foreign investment and promoting privatisation and trade liberalisation without anyprotection.The economy has been stranded in a no-way-out situation that leads to the very serious question ofwhether the IMF prescription is efficacious.Yet, this is a fact. On June 12, the Coordinating Minister for the Economy Dorodjatun Kuntjoro-Jakti,without consulting the legislature, extended the LoI until December 2003. It simply means that we aregoing to be more deeply trapped in debt we can never pay.State Minister of National Development Planning, Kwik Kian Gie, angrily expressed his fears thatIndonesia will never be able to emerge from the crises and pay its international debt, which hasreached Rp 700 trillion (US$ 71.4 billion) –and which will grow under this LOI extension.The world has changed so dramatically in the last half century that it is nearly impossible to believethat only four decades ago the newly emerging colonies of Africa and Asia were joining with theirbrethren in Latin America to push for a New International Economic Order (NIEO).Galvanised by centuries-old colonial injustices and sparked by the radical ideas of such men asSukarno in Indonesia, Gandhi in India, Nkrumah in Ghana, Fanon in Algeria, Nyerere in Tanzania andCastro in Cuba, these Third World nations set out to challenge the entrenched power of the UnitedStates and Western Europe.The NIEO was a collection of progressive intellectuals and politicians who believed that, left on theirown, free markets would never reduce global inequalities. These leaders argued for improved termsof trade and a more just international economic system.These developing countries fought for fairer terms of trade and pushed their case through producercartels like OPEC and UN by forming the Group 77, which was instrumental in establishing the UNConference on Trade and Development (UNCTAD).But when Petrodollars flooded Northern financial centers, President Nixon floated the dollar,sabotaging the Bretton Woods fixed exchange-rate system. The Third World debt expanded and theIMF and World Bank bailed out debt-strapped nations. Yet, in return these nations had to adoptstructural adjustment policies which favour cheap exports and spread poverty throughout the South,including IndonesiaIndonesia saw its Rupiah devalued to an actual 400 per cent, making it impossible to pay the debt.The debt has therefore been rescheduled through the groups of donors in the Paris Club and LondonClub. Yet, one condition for rescheduling applies. It is the LOI, which also becomes a precondition in

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