With Indonesia perilously near the brink of social chaos, President Suharto's determination to press ahead with a currency board arrangement is like Nero's fiddling while Rome burned. Despite putting his signature to a US$43 billion International Monetary Fund rescue package which might have put the country on the road to recovery, Mr Suharto appears to think he can take the money but not the medicine.
Virtually every international expert has warned that pegging the rupiah is certain to fail, leading to a flight of currency and a complete shut down of the economy. Whether Mr Suharto favours the scheme to enable him to continue food subsidies in a bid to stop the rioting, or as a cynical exercise to enable his family to convert their rupiahs into dollars at improved rates, the fact remains that he cannot sidestep the measures necessary to restore credibility to his regime.
If Jakarta abandons the policies imposed in the 60-page IMF package signed by the President, he runs the risk of sinking his own country's economy and pulling the rest of the region down with him. But his gamble may be predicated on that very issue. For all its tough talking, the IMF can hardly stand by if the currency board gamble fails. No other agency can bail the country out, and the implications of Indonesia's collapse and what that might mean for the rest of Asia is unthinkable. While this impasse with the IMF continues, there is an increasing danger that the situation will get out of hand. When idyllic holiday spots like Lombok become the scene of looting and rioting, there is little chance of the tourist industry helping the country through the crisis, as is happening in Thailand and Malaysia.
The present question is who is running the economy? Is it the President, the IMF or Jusuf Habibie, the controversial minister tipped as Mr Suharto's eventual successor. Until some sort of answer emerges, Indonesia's instability will increase, and the rupiah will continue to fall. Mr Suharto has to recognise that there is no pain-free remedy to Indonesia's ills, and no quick-fix solutions.
