Govt extends talks with IMF<\/p>\n
JAKARTA (JP): The government said on Thursday it was still in
\ntalks with the International Monetary Fund (IMF) over the final
\ndraft of the fund-sponsored economic program, citing unresolved
\nissues over the state budget.<\/p>\n
The government had previously hoped to finalize the so-termed
\nletter of intent (LoI) by Thursday.<\/p>\n
State Minister for State Enterprises, Laksamana Sukardi said
\nprogress during negotiations with the IMF was going well, but
\nrequired some \"fine-tuning\".<\/p>\n
\"The main concern and obstacle is the state budget, other
\nissues just relate to its sustainability,\" Laksamana said,
\nwithout elaborating.<\/p>\n
A high-level mission of the IMF arrived in Jakarta on Sunday
\nto draw up a new LoI that would pave the way for the resumption
\nof the stalled US$5 billion loan program to Indonesia.<\/p>\n
Laksamana declined to estimate a new target date for
\nconcluding talks with the IMF team.<\/p>\n
Leading the team is the fund's Asia Pacific Deputy Director
\nAnoop Singh, who said its planned stay in Jakarta ran until next
\nMonday, but declined to say when the new LoI would be signed.<\/p>\n
\"We will continue the meetings, perhaps until Monday,\" he
\nsaid, but played down suggestions a new LoI could be expected by
\nthen.<\/p>\n
Asked how the meetings had progressed, he said, \"there are no
\nsurprises, we are on track.\"<\/p>\n
Last month, the fund dispatched the same team to Jakarta with
\nthe same mission, to draw up a new LoI.<\/p>\n
It left without signing a deal with the previous
\nadministration as then president Abdurrahman Wahid was about to
\nbe dismissed.<\/p>\n
Indonesia must secure a new LoI by early September at the
\nlatest, or else its $2.8 billion debt rescheduling deal with the
\nParis Club of creditor nations will become invalid.<\/p>\n
Laksamana said that the state budget was the outstanding
\nissue, especially concern over a number of missed revenue
\ntargets.<\/p>\n
He said earlier the government would unlikely meet its
\nprivatization target of Rp 6.5 trillion (about $764.7 million)
\nfor this year.<\/p>\n
With privatization proceeds amounting to zero thus far,
\nLaksamana had to catch up with the target in four months' time.<\/p>\n
\"We want our targets to be more realistic, and avoid making
\npromises we cannot keep,\" he said.<\/p>\n
Base money<\/p>\n
Bank Indonesia Governor Sjahril Sabirin said the IMF had
\nconsidered allowing Bank Indonesia to relax its base money supply
\ntarget.<\/p>\n
The IMF, he said, understood Bank Indonesia's difficulty in
\nmeeting the target.<\/p>\n
Reducing the base money supply to Rp 108 trillion is part of
\nsix prior actions Indonesia must meet before it can sign the LoI.<\/p>\n
Current supply of base money stands at around Rp 111 trillion,
\naccording to Sjahril.<\/p>\n
\"I cannot disclose now whether it (the target) will still be a
\nprior action or just a performance criterion,\" he said.<\/p>\n
Bank Indonesia reduces the base money supply by raising its
\ninterest rates.<\/p>\n
During last Wednesday's auction, Bank Indonesia three-month
\npromissory notes (SBI) surged to 17.61 percent, from 17.30
\npercent last week.<\/p>\n
Both banks and the corporate sector have been complaining
\nabout the high interest rate.<\/p>\n
Sjahril said the recent hike in the SBI rates reflected
\nconditions in the tight money market.<\/p>\n
\"I did not deliberately raise interest rates, market
\nconditions demanded so,\" he said.<\/p>\n
The higher the SBI rates, the more liquidity Bank Indonesia
\ncan absorb from the money market. Excess liquidity adds to
\npressure on the rupiah and inflation.<\/p>\n
Although pressure on the rupiah has eased since the new
\ngovernment took over, the central bank remains worried about the
\nstill high inflation rates.<\/p>\n
They have been hovering at double-digits over the past five
\nmonths, mainly because the weaker rupiah increased import costs,
\nand following the government's fuel and power price hikes.<\/p>\n
Turning to the U.S. Federal Reserves' decision to cut its
\nrates by another 25 basis points to 3 percent, Sjahril said he
\nsaw no need for Bank Indonesia to follow suit because Indonesia's
\ncondition was different.<\/p>\n
\"There is little connection between us and the Fed,\" he said.<\/p>\n
Bank Indonesia Senior Deputy Governor Anwar Nasution said the
\ncentral bank might lower rates if the economy showed improvement
\nover a one month period.(bkm)<\/p>\n
Editorial -- Page 4<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/govt-extends-talks-with-imf-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }