Burhanuddin Abdullah, figure behind the payoff of Indonesia’s debt to the IMF

198
Burhanuddin Abdullah, Former Governor of Bank Indonesia. (photo: IO/ Yoga)

IO, Jakarta – It has been 10 years since he took the helm of Bank Indonesia. At the age of 70, Burhanuddin Abdullah still looks fit, thanks to his various activities. Now he has a busy life as the rector of the Indonesian Cooperative Institute (IKOPIN), Bandung. During his tenure as Governor of Bank Indonesia in 2003-2008, Burhanuddin recorded proud achievements because during his leadership, Indonesia was able to pay off the debt to the International Monetary Fund (IMF). What’s the back story?

Beyond Expectations
In a conversation with the Independent Observer at his home, Burhanuddin, commonly called Burhan, recounted he never had any ambition to become a banker – not to mention becoming the “number one person” in Bank Indonesia.

Burhan, who was born in Garut, West Java, gained broad experience in various jobs before dedicating himself to a career in Bank Indonesia. He said that after graduating from the Agricultural High School (SPMA), he immediately received a letter of appointment in the Agriculture Office of Rangkas Bitung Regency. “I only worked 6 months. Then I took a test at Padjajaran University and graduated from the Faculty of Agriculture”.

After completing his studies at Padjadjaran University, Burhan was accepted to work at the Directorate General of Plantations in Aceh. Unwilling to live in that area, Burhan decided to quit and move to Jakarta.

One day, he read a newspaper and saw a job opening at Unilever. Burhan applied for it and was accepted.” I was assigned to Unilever’s subsidiary as a Tea Tester. “My duty was to drink various types of tea, then determine the selling price,” said this father of 4 children.

Because the career path in the company was too difficult, Burhan looked for job opportunities elsewhere.

After passing a series of tests, Burhan was accepted at Bank Indonesia. “Only 30 of the 1500 applicants who applied were accepted here,” he explained proudly.

Upon joining Bank Indonesia, his salary was only Rp60 thousand, whereas at Unilever his salary had already reached Rp275 thousand. “I had no regrets” he said.

Possessing much ability, being willing to learn and work hard are special values that Burhan has. His career skyrocketed, even passing those of his friends and seniors.

After only 15 years of work at Bank Indonesia, he became the main employee, even chairing the Bank. “All was beyond my expectation,” said the man who had been the Coordinating Minister for Economic Affairs at the time of President Abdurrahman Wahid.

Successfully paid off debt
In 1997 the monetary crisis hit Indonesia. The first Asian country s hit by the monetary crisis was Thailand. However, at that time we were brave enough to claim that our economic fundamentals were strong. But in fact, Indonesia also experienced a crisis, and was then forced to follow an IMF program.

Burhan was very confident; the IMF was not a solution, because in many countries that had followed IMF guidance, economic conditions even worsened.

Prior to taking out a loan, IMF summoned first echelon officials from various ministries. “The IMF asked what we will do in the next 3-6 months to resolve our economic problems.”

The IMF wrote a letter of intent containing 138 points. However, after being sworn in as Coordinating Minister for the Economy, Burhan phoned Stanley Fischer, the First Deputy Managing Director of the IMF, and asked him to come to Jakarta. “I guarantee we can talk about what you want to do. We make a new letter of intent. There were 3 IMF requests: no longer speaking about the amendments to BI Laws, no longer discussing the potential sale of islands to foreign interests, and so forth. And no talk about asset securitization. I agreed; we would not talk about those points.  Finally, they came around,” explained the man who loves to read books.

When the IMF arrived, Burhan said he would compose a letter of intent only concerned about economic issues. The letter of intent contained 38 points.

In 2003, Burhan became Governor of Bank Indonesia. At that time, he began to think about Indonesia’s debt to the IMF, which was in a Stand-By Arrangement (SBA) category. “The nature of the SBA debt: the money is given and it is put into our balance of payments. So, it becomes a part of the foreign exchange reserves, and it should not be used by us, unless we are in danger of running out of reserves. It is lent to cultivate trust, because there is foreign exchange. It cannot be used to build infrastructure. We pay interest but the money cannot be used. The interest was 4%. So, this is not the foreign exchange reserve money in Jakarta, we place it in the banks outside. At that time interest rates fell, but IMF interest rates did not go down. We could not cultivate anywhere, and if we invested the money, it also remained a loss. I started to calculate, at that time our foreign exchange reserve was 29 billion dollars. We paid interest of nearly 400 million dollars per year. The result of that investment was also a loss” he admitted.

Finally, Burhan came to conclusion that Indonesia needed to pay off the debt to the IMF. “The reason for paying the IMF, because we could not use the money; the interest we paid was also a loss. Especially when commodity prices are high enough, the balance of payments is also a large surplus and good exports.

“So if you pay now, there is no problem whatsoever,” he explained

Burhan then discussed with President SBY. The President agreed. Indonesia’s debt to the IMF of US$ 8 billion was paid off, 4 years before the deadline time limit. It had to be paid by 2010,” Burhan explained proudly. (Dessy Aipipidely)