1997
July 8: Indonesia's currency, the rupiah, begins to fall. The Government widens its rupiah trading band from 8 to 12 percent.
July 24: Several Asian currencies - the Thai baht, the Malaysian ringgit, the Philippine peso and the Indonesian rupiah - all slump as confidence in the region rapidly deteriorates.
August 14: After several days of decline of the rupiah, Indonesia abolishes its system of managed exchange rate. The rupiah sinks still further. October 6: The rupiah sinks to a new low of Rp. 3,845 against the dollar. The Indonesian Government announces it will ask the International Monetary Fund (IMF) for financial assistance.
October 7: The IMF agrees to send a technical team to Indonesia to begin developing an economic restructuring program and a financial assistance package.
October 10: The White House announces it will provide emergency assistance to the Indonesian Government in combating forest fires aggravated by global El Nino weather patterns. The fires are causing high levels of air pollution across Southeast Asia and economic and environmental damage to several regions of the country.
October 31: Indonesia's IMF package is unveiled in Jakarta. It provides for as much as $40 billion in financial assistance, including a front-line defense fund of $23 billion. Indonesia agrees to close 16 insolvent banks, reduce import tariffs, deregulate several commodity products, open its domestic wholesale and retail markets, postpone several large infrastructure projects, and implement other economic reform measures. The IMF package includes a commitment from the United States of $3 billion in the form of second-tier defense loans and bilateral credits.
November 5: The IMF approves a $10 billion loan for Indonesia as part of the international package. November 22-24: President Soeharto discusses Indonesia's economic restructuring program with President Clinton at the APEC economic leaders meeting in Vancouver. The Asian financial crisis is a lead agenda item at the APEC meeting, but no policy decisions are reached by the leaders.
December 10-12: Indonesian Finance Minister Mar'ie Muhammed travels to Washington and New York to meet with US officials, the IMF and business and banking leaders.
1998
January 6: Indonesia unveils its 1998/99 Central Government budget, which projects 4% economic growth in 1998 and a 23% increase in revenue and expenditures over the previous budget.
January 7-12: The rupiah loses half its value against the US dollar, breaking through the Rp. 10,000 to the dollar level, before a slight recovery. The freefall is precipitated by perceptions that the Central Government Budget was not tough enough to meet the IMF-mandated austerity measures and by market talk that Indonesia might declare a debt moratorium.
January 11: IMF Deputy Managing Director Stanley Fischer arrives in Jakarta to begin talks with the Indonesian Government about additional economic reform measures.
January 13-15: Defense Secretary William Cohen and Deputy Treasury Secretary Lawrence Summers confer with Indonesian Government leaders in Jakarta. Secretary Cohen reiterates the important role Indonesia plays in ensuring regional security and stability.
January 14: IMF Managing Director Michel Camdessus departs for Jakarta, saying that the IMF was asking Indonesia for a letter of intent commitment to implement further economic reforms.
January 15: President Soeharto and the IMF sign an agreement strengthening Indonesia's economic reform program. The agreement calls for significant new structural reforms, including lifting subsidies for energy, dismantling domestic trade restrictions in several industries, establishing greater independence for the Central Bank (Bank Indonesia), reducing selected foreign investment barriers and ending support for Indonesia's national automobile program and national aircraft program.
January 16: The Clinton Administration and the IMF announce strong public support for Indonesia's new economic restructuring program. Camdessus predicts the Indonesian economy will recover within two years.
January 21: The rupiah falls to a record low of Rp. 12,000 to the dollar. Reports surface that Indonesian corporations are now paying off their foreign debts in rupiah. President Soeharto formally establishes the Economic and Financial Resilience Council to supervise and monitor Indonesia's economic reforms. The Council immediately approves all of the reforms mandates under Phase I of the IMF agreement. Several presidential and ministerial decrees are signed into law.
January 22: The rupiah continues its fall a week after the Indonesian Government agrees to the new IMF-mandated reform measures. The IMF package shows no signs of alleviating Indonesia's debt and confidence crisis. The rupiah falls to a record low of Rp. 17,000 on speculation that Research and Technology Minister Jusef Habibie might emerge as Indonesia's next Vice President. Bank Indonesia intervenes and the rupiah pulls back up to 11,800.
January 23: The Indonesian Government announces a revised 1998/99 Central Government budget, based on new figures agreed to between the Government and the IMF. The new budget projects 0% economic growth in 1998, inflation of 20% and a return of the rupiah to Rp. 5,000 to the US dollar.
January 26: The Clinton Administration and the IMF issue statements supporting Indonesia's actions to comply with the IMF-mandated reform program.
January 27: Indonesia announces a temporary freeze on debt servicing, but says this action is not a moratorium. Companies with the dollars to pay off their creditors must continue to do so. Indonesia also announces a series of banking reforms in which the Government will guarantee the security of both depositors and creditors. The Government creates the Indonesian Banking Restructuring Agency (IBRA), which will be responsible for rehabilitating banks that are not sound or are unable to restore themselves to soundness.
February 6-12: Indonesia reports that it may set up a Currency Board System to stabilize the rupiah by establishing a direct peg to the US dollar. The rupiah strengthens on the news, rising 28% to a level of Rp. 7,600 to the dollar. However, within the next few days, the IMF and the Clinton Administration strongly urge Indonesia not to take this action at the present time. The rupiah declines again.
February 3-5: World Bank President James Wolfensohn visits Indonesia to discuss the impact of the economic crisis on Indonesia's low income and poor populations.
February 13: President Soeharto and President Clinton discuss Indonesia's restructuring program by telephone. President Clinton urges Indonesia not to establish a Currency Board System. President Soeharto reportedly tells President Clinton that the IMF-mandated program is not stabilizing the rupiah, and additional actions may be necessary.
February 13: President Soeharto installs Dr. Dorodjatun Kuntjoro-Jakti, a respected Dean of Economics at the University of Indonesia, as Indonesia's new Ambassador to the United States. Indonesia's previous Ambassador in Washington, Arafin Siregar, retired from government service in November 1997.
February 15-17: Indonesia's major political parties and the Armed Forces (ABRI) endorse Jusef Habibie as Indonesia's next Vice President.
February 17: President Soeharto appoints Sjahril Sabirin as the new Governor of Bank Indonesia, replacing Soedradjad Djiwandono.
February 20: Japan announces a series of new loans, totaling 300 billion yen ($2.36 billion), to support Indonesia's recovery. The US, Japan and Australia announce a plan to grant export credits to Indonesia to help the country import badly-needed commodities and raw materials.