Jakarta. Bank Indonesia, the country’s central bank, has weighed in on a public debate on Tuesday over Indonesia’s debts to the International Monetary Fund following misunderstanding of international accounting between President Joko Widodo’s aides and political rivals.
A $9.1 billion debt created by Indonesia to the International Monetary Fund (IMF) during the Asian financial crisis in 1998 was paid off by the government in 2006, Bank Indonesia said on its official Twitter account on Tuesday.
Still, the central bank records a liability to the Fund of $2.8 billion in its balance as of the end of April, which reflects an allocation of the country’s special drawing rights (SDR).
“It is a consequence for us being an IMF member,” Bank Indonesia said.
Bank Indonesia drew SDR in early 2009 in order to boost its foreign exchange reserves to shield the country’s financial sector from the global financial crisis. IMF members are entitled to certain allocations of SDR in their reserves based on their economy’s size.
The countries can then trade SDR for hard currency with other members. SDR is not a currency and its value is determined against a basket of key international currencies — the euro, Japanese yen, pound sterling and US dollar. As of Tuesday, 1 SDR is equivalent to $1.39, according to the IMF’s website.
Still, such monetary issues might be difficult to comprehend for some of Indonesia’s politicians, who erupted in debate through national media.
Former president Susilo Bambang Yudhoyono was lambasted for making false claims when he criticized his successor over Indonesia’s debt to the IMF.
In a series of tweets, Yudhoyono criticized Joko’s remarks made during last week’s Asian-African Conference during which the current president called for new global order.
Joko criticized global financial institutions — namely the IMF, Word Bank and the Asian Development Bank — for failing to accommodate the shift in economic power to emerging countries. The speech did not go well with Yudhoyono.
“Bottom line is Jokowi said Indonesia is still borrowing money from the IMF,” Yudhoyono tweeted late on Monday, referring to the president by his popular nickname.
“I must say Jokowi’s statement is false. Indonesia has paid all of its debt to the IMF in 2006,” he continued, crediting his own administration for the payment.
“Since 2006, Indonesia is no longer IMF’s patient. No longer dictated by the IMF. We are free to design our own economic development.”
Some officials and activists, though, dismissed Yudhoyono’s statements, saying that after Indonesia paid off its debt to the IMF in 2006, Yudhoyono’s administration again borrowed $3.09 billion from the same institution in 2009.
Joko’s Cabinet Secretary Minister Andi Widjajanto said on Tuesday that the 2009 loan was to increase Indonesia’s central bank reserves. “It is not a fiscal debt which we can use for development,” he said.
Scenaider Siahaan, a director at Indonesia’s Debt Office Management confirmed that Indonesia still has debt outstanding with the IMF, but added that it was proposed by Bank Indonesia, an independent body not under the auspices of the president.
Finance Minister Bambang Brodjonegoro said the fund is a standby loan that Indonesia never used. “Anytime [Indonesia] wishes to use it we can. But, because the fund originates from the IMF, we call it a loan,” he said, adding that so far Indonesia has yet to pay any interest on the SDR allocation.
A country would only pay interest should its SDR holding be lower than its allocation, according to IMF website. Conversely, the country gains interest from holding SDR higher than its allocation.
In his speech to delegates at the Asian-African Conference in Jakarta, Joko challenged Western-based institutions saying that the notions that only they can solve global economic problems “are obsolete views that need to be discarded.”
Several of the countries that participated in the original Bandung Conference 60 years ago are today among the biggest and fastest-growing economies in the world, including China, India and host Indonesia. But the so-called Bretton Woods global financial institutions set up after World War II continue to be dominated by rich Western countries. The US, for example, holds a 16.5 percent stake in the IMF with veto powers.