Government and IMF sign letter of intent<\/p>\n
JAKARTA (JP): The government finally signed on Wednesday a new
\nletter of intent (LoI) with the International Monetary Fund to
\npave the way for the release of a US$400 million loan early next
\nmonth.<\/p>\n
The agreement was signed by the Coordinating Minister for the
\nEconomy, Finance and Industry Kwik Kian Gie, finance minister
\nBambang Sudibyo and Bank Indonesia Governor Sjahril Sabirin.<\/p>\n
Kwik said at a news conference that the fund was expected to
\ndisburse some US$400 million in new loans to the country early
\nnext month after its executive board approved the letter.<\/p>\n
\"Agreement on the LoI is a sign of the government's progress
\nin implementing its economic reform program ... This program is
\naimed squarely at bringing Indonesia back to a path of rapid
\neconomic growth,\" Kwik said.<\/p>\n
The news conference was supposed to be held at the
\npresidential office, but was moved to Kwik's office following a
\nboycott by journalists assigned to cover events at the
\npresidential office.<\/p>\n
The IMF promised President Abdurrahman Wahid's administration
\nin January that it would provide a total of $5 billion in loans
\nto help finance the country's three-year economic reform program.<\/p>\n
The IMF was supposed to disburse $400 million last month, but
\nit was delayed due to the country's slow progress in implementing
\nthe reform program agreed in January.<\/p>\n
The IMF and the government completed the first review of the
\nreform program earlier this month.<\/p>\n
Sjahril said the signing of the new letter should a provide
\npositive impact on the ailing rupiah because it showed the
\ngovernment was committed to implementing the reform program.<\/p>\n
\"This should provide a positive impact on the rupiah,\" he
\nsaid.<\/p>\n
The rupiah closed 1.7 percent higher on Wednesday at Rp 8,395
\nper U.S. dollar compared to Rp 8,535 on Tuesday.<\/p>\n
The rupiah has been under pressure over the past couple of
\nweeks due to a combination of external factors, combined with
\ndomestic political and economic uncertainty.<\/p>\n
The new agreement basically contains additional economic
\nmeasures, particularly in the fiscal, bank reform and corporate
\nrestructuring areas, to support the reform program set out in the
\nJanuary Memorandum of Economic and Financial Policies (MEFP).<\/p>\n
The government said that economic growth this year was
\nexpected to be at the top end of the targeted 3 percent to 4
\npercent range, while end-period inflation should be well within
\nthe targeted 5 percent to 6 percent range.<\/p>\n
On the fuel subsidy policy, the government said that fuel
\nprices would be raised by an average of 12 percent, but their
\nfull implementation was delayed in order to better prepare the
\npublic for the increase, as well as to finalize measures to
\nprotect the poor.<\/p>\n
\"We are working toward a mechanism involving a lump-sum cash
\ntransfer to targeted households, and using the safeguards
\nestablished for the social safety net program, in consultation
\nwith the World Bank,\" the government said in the supplementary
\nMEFP.<\/p>\n
The government was set to raise fuel prices starting last
\nmonth, but the measure was delayed due to public protests and
\nconcern over possible abuse of the fuel subsidy mechanism for the
\npoor.<\/p>\n
The government did not specify when the fuel price increase
\nwould be implemented, but said the mechanism to protect poor
\nfamilies against the fuel price increase was expected to be
\ncompleted by the end of June.<\/p>\n
The IMF has strongly insisted the government drastically
\nreduce fuel subsidies to lessen the burden on the state budget.<\/p>\n
On the fiscal reform agenda, the government expected the House
\nof Representatives would approve a new tax law by July.<\/p>\n
The government also said that it was committed to delivering
\nthe increased fiscal transparency, including a performance audit
\nof the tax office by the Development Finance Comptroller (BPKP),
\nwhich would start in June and was expected to be completed by the
\nend of November.<\/p>\n
The government said it intensified preparation for
\nimplementing fiscal decentralization in 2001.<\/p>\n
\"A firm timetable for implementation of fiscal
\ndecentralization will be prepared by the time of the next review
\n(of the economic reform program), in consultation with the
\nforthcoming IMF\/World Bank technical assistance mission,\" the
\ngovernment said.<\/p>\n
The IMF and the government were scheduled to meet again in
\nJuly to review progress of the reform program.<\/p>\n
In the bank restructuring area, the government said the
\nIndonesian Bank Restructuring Agency (IBRA) would reach several
\nmajor debt restructuring agreements, particularly with the top 21
\nobligors who account for about 36 percent of IBRA's total loans
\n(about $12.4 billion).<\/p>\n
An obligor is a cluster of debtors controlled by a single
\nbusiness group.<\/p>\n
\"IBRA's strategic objective is to reach the stage of
\nfinalizing restructuring term sheets, or initiating legal actions
\nagainst uncooperative debtors, for at least 35 percent of the
\nnominal loan value of these obligors by June, and for all the 21
\nobligors by end 2000,\" the government said.<\/p>\n
IBRA has received more than Rp 200 trillion worth of
\nnonperforming loans from domestic banks as part of the country's
\nbank restructuring program.<\/p>\n
The agency has been criticized for its slow progress in
\nrestructuring or recovering the bad loans.<\/p>\n
The government also said IBRA and Bank Indonesia would publish
\nbefore the end of June their audited accounts so that the public
\nwould have a clear view of the financial positions of the two
\ncritical institutions.<\/p>\n
The government added that a new governance framework would be
\nestablished for IBRA.<\/p>\n
\"This will include an independent governing body, in order to
\nensure that the agency is professional, free from political
\ninterests and transparent in its operations,\" the government
\nsaid.<\/p>\n
With IBRA's huge array of assets worth more than Rp 600
\ntrillion, there are fears the agency would be prone to
\nmanipulation by groups with vested interests. (rei\/udi)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/government-and-imf-sign-letter-of-intent-1447893297",
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"sponsor": "Okusi Associates",
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