Indonesia -- from borrower to lender

NDONESIA, which received billions of dollars in rescue funds from
the International Monetary Fund (IMF) more than a decade ago, is now
turning around to become a lender to the fund instead.

President Susilo Bambang Yudhoyono expressed his pride over the country's pledge to the fund.

"Now
Indonesia can take a bolder stance with the IMF, as its debt has been
repaid in 2005," Yudhoyono said at the State Palace on Tuesday last
week after holding a meeting with the fund's managing director,
Christine Lagarde. He added that Southeast Asia's largest economy was
"now independent financially."

Hatta Rajasa, the coordinating
minister for the economy, said Indonesia would provide US$1 billion
(RM3.18 billion) to the fund, with the money coming from the central
bank, via its foreign-exchange reserves.

"It will be in a form of foreign exchange from the Bank Indonesia (BI)
funds. It will not be taken from the state budget," Hatta said at the
presidential palace.

Indonesia's
international reserves stood at US$106.5 billion (RM339 billion) at the
end of June, falling by almost US$5 billion (RM15.9 billion) from
US$111.5 billion (RM355 billion) in May, according to data from the
central bank's website.

The pledge is part of a commitment made
at last month's meeting of the Group of 20 nations, including
Indonesia, to support the IMF, which needs US$430 billion (RM1.36
trillion) to help countries facing financial difficulties. Malaysia has
committed US$4 billion and the Philippines US$1 billion.

Bank
Indonesia governor Darmin Nasution, who accompanied Yudhoyono in the
meeting, said the central bank would purchase bonds issued by the IMF,
without providing details on the mechanism of the bond purchase.

He described the money as the fund's "second-line defense" and that it would remain in Indonesia's reserves.

Still, some economists, analysts and Indonesian lawmakers were mixed in their response to the country's commitment.

Destry
Damayanti, chief economist at Bank Mandiri, the country's biggest
lender by assets, said the government's move should be welcomed.

"In
today's economic uncertainty, the government needs to diversify its
investment portfolio and seek safer instruments," she noted, adding
that being an international lender, the IMF was rated AAA by rating
agencies, implying that the default risk is almost zero.

Meanwhile,
Sasmita Hadinegoro, chairman of the Economic and State Budget
Foundation (LPKEN), a private think tank, called on the Indonesian
people to reject the government pledge to the IMF, warning that the
move would do more harm than good to the country.

I Gusti Agung
Rai Wirajaya, a lawmaker from the opposition Indonesian Democratic
Party of Struggle (PDI-P), said his party had questions about the
government's decision.

"This is weird," he said, adding that his party would propose an inquiry into the issue.

The
IMF currently has US$436 billion in funds, and the loan from Indonesia
would only be used if the amount fell to US$100 billion, Darmin said.

"Only
if it touches US$100 billion would the money be used. So, it is a very
small probability that the IMF will use the fund," he noted.

Lagarde
told a press conference after her meeting with Yudhoyono that the IMF
would not allocate funds from Indonesia to any specific region.

"They're
not allocated to a particular region of the world. It's not like it was
a big pot of money that is available for Europe," Lagarde said. Arientha Primanita, Francezka Nangoy & Tito Summa Siahaan