Abstract
Asian Financial crisis of 1997 started from Thailand and violently spread
to Indonesia. As a result foreign speculative investors pulled out their
investments fully from the country and sucked US dollar liquidity by
causing severe depreciation of the Indonesian currency ‘Rupiah’. Private
sectors, however, where most of the domestic borrowings were in the low
interest rates and their profits were in Rupiah-their debts suddenly
increased as per the US dollar get valued quickly, thus, heavy Rupiah
depreciation leaved many companies virtually bankrupt. For the short term
relief, these companies desperately sold Rupiah and buy US dollar, this
caused Rupiah value to drop-out more from RP 2,600 per US $ in 1997 to
RP 14,800 per US $ in January 1998. Efforts made by the central bank to
defend Rupiah floating by selling Dollar in International market had not
much result oriented, but, at other side the drained Indonesian foreign
exchange reserves and enforcing government to free-float the currency
sought liquidity from the International Monetary Fund (IMF).
This paper attempts to present an overview that caused Indonesia to get
economically hit by the 1997’s Asian Financial Crisis, its drawbacks and
shortcomings under the International Monetary Funds’ prescribed policies
that further may or may not influence the Indonesian economy. The aim of
this paper is to clearly focus on the role of International Monetary Fund in
1997’s financial crisis towards Indonesia. This would also be taken in to
consideration that as the study focused Asian Financial Crisis, statistical data has been calculated about crisis and post crisis period i-e from 1997 up
to 2003. For Indonesia, 2003 is that year where she had been repaid its
entire external loan outstanding to IMF. No any loan disbursements have
been found from IMF to Indonesia the year after.
Natasha Khero, Abdul Ghafoor Bhatti. (2013) ASSESSING THE IMF FUNDING PROGRAM IN INDONESIA WITH REFERENCE TO 1997’S ASIAN FINANCIAL CRISIS, Asia Pacific, Vol-31, Issue 1.
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