Suharto Resists Dropping Currency Plan

Indonesia is still considering a plan to boost its currency, President Suharto declared Tuesday as he resisted the arm-twisting of U.S. envoy Walter Mondale, a firm opponent of the strategy.

During a 1 1/2-hour meeting, Suharto told the former U.S. vice president that Indonesia will stick with tough reforms tied to a $43-billion bailout by the International Monetary Fund.

But despite international opposition, Suharto said his government is still studying a plan to create a currency board that would peg the rupiah to the dollar at a fixed exchange rate.

Mondale, whose trip to Jakarta reflected U.S. concern that Suharto is stalling on economic reforms, told the 76-year-old leader that only IMF austerity measures can revive Indonesia’s once-booming economy.

“There are no quick fixes that provide an alternative,” Mondale said, referring to the currency board during a news conference after the meeting at Suharto’s home.

The IMF says a currency board could torpedo reforms by stripping the central bank of control over monetary policy. The reforms include slashing subsidies and dismantling monopolies run for decades by Suharto’s family and associates.

Five people have died in riots in recent weeks over price increases as Indonesia endures its worst economic crisis since Suharto, a former army general, took power 32 years ago.

Several hundred students in Jakarta held anti-Suharto rallies at two universities Tuesday. The students complained that a special assembly poised to reelect Suharto was undemocratic and unable to fix the nation’s economy.

Police did not break up the protests, despite a ban on political rallies in the capital.

The Indonesian government is frustrated that IMF reforms have failed to lift the value of the rupiah and fearful that austerity measures will unleash more unrest.

Prices rose 12.76% in February, the highest monthly rate in three decades. The cost of many commodities has risen far higher and fuel and electricity prices are set to rise in April.

Suharto’s so-called “IMF Plus” plan would peg the rupiah to the dollar under a currency board at “a reasonable level,” the official Antara news agency quoted the president’s spokesman Murdiono as saying.

At the same time, Murdiono said, Suharto told Mondale that he is determined to implement terms of the bailout package.

There have been growing calls for Suharto, who has kept a tight hold on Indonesia, to step down or implement democratic reforms in the world’s fourth most populous nation. He is expected to be renominated next week to another five-year term.

President Clinton has repeatedly stressed the need for reform in several telephone conversations with Suharto, and a number of U.S. and other foreign officials have passed through Jakarta with the same message.

But critics questioned whether Mondale’s visit will be enough to push Suharto into adopting economic reforms that would severely curtail the business interests of his three sons and three daughters.

“He has been trying to evade this responsibility, and his main concern is how to save his own children,” said Mochtar Buchari, former head of the Indonesian Institute of Science.