Observing Indonesia's Relationship With The IMF (1997-2003)
Context: The Asian Financial crisis (1997-8)
- Thai government decided to let its currency float, discontinuing its peg to the US dollar.
- Tipped domino effect/speculative attacks
- By 1998, Indonesia’s GDP had contracted by 13 per cent of its GDP.
- Crisis occurred due to a congruent bundle of weak regulatory institutions that encouraged careless policies that instigated excessive risk taking
- IMF relationship - alleviate or worsen economy?
THe IMF
- Mandated to oversee the fixed exchange rate system and provide short-term loans and support to countries that were facing financial difficulties
- ‘Washington Consensus’, a term coined in 1989 by John Williamson
- Originally a mandate based on Latin American Crisis (1980)
THE imf and indonesia
- Under Soeharto, Indonesia rejoined the IMF by 1967
- Longest aid relationship compared to all other Southeast Asian country (1997-2003)
- In that time, Indonesia had five different presidents
- Problems with surveillance, implementation but also political instability
IMF Assistance under different presidents
- President Soeharto (1997-8)
- President Habibie (May 1998 – June 1999)
- President Wahid (1999-2001)
- President Megawati Soekarnoputri (2001-3)
- President SBY (2003-end)
-
Relationship differed based on political stability
-
Surveillance was often weak
-
Underestimated levels of corruption
-
Practical enforcement was absent
-
Issues faced by Indonesia were different than Latin American countries
-
Limited knowledge/access to critical information