"The fund is relatively small when compared to our foreign exchange reserves which amount to more than US$100 billion. Being a G20 member, Indonesia is considered by the IMF to be part of the solution to the European crisis," said Nugroho SBM of the Semarang-based Diponegoro University (Undip) here on Tuesday.

He also added that the extension is not really a loan but a step towards capital participation by Indonesia as an IMF member.

Chief economic minister Hatta Rajasa confirmed last Friday that Indonesia would extend US$1 billion in loans to the IMF as a contribution to the multilateral institution's efforts to secure the global economy.

"We are part of the global economy. If they (other countries) are affected, so are we. Therefore, we must participate. If we stay idle we can also be affected," he said.

He revealed that the IMF needs US$430 billion to be injected into the system to overcome financial difficulties, but hoped that the loan would not be used entirely by Europe, but also extended to Africa and other poor countries in need.

Nugroho said that the capital participation of Rp1 billion will not disrupt the country's foreign exchange reserves, which currently stand at an estimated US$110 billion.

"The impact is relatively small. On the other hand, our capital participation with the IMF will promote Indonesia's image in the eyes of the international community. As a G20 member, we deserve to raise capital participation in the IMF," he said.
One of the results of the G20 Summit in Los Cabos, Mexico, held recently was a commitment by the participating countries to support sufficient financial supply towards IMF in order for it to carry out its global surveillance function.

For that G20 leaders agreed to wholeheartedly support the agreements reached by their financial ministers and central bank governors to give an additional operational fund of US$430 to the IMF collected under bilateral arrangements between donors and the IMF.