IMF approves $341m in new loans<\/p>\n
Berni K. Moestafa, The Jakarta Post, Jakarta<\/p>\n
The International Monetary Fund's (IMF) approved new loans worth
\nUS$341 million for Indonesia, signalling continued support in the
\ngovernment at a time when public confidence has been put to the
\ntest over recent controversial policies.<\/p>\n
\"The IMF has approved it (the loans) through its board of
\ndirectors, and it (the loans) will be disbursed in a few days,\"
\nFinance Minister Boediono told reporters on Tuesday.<\/p>\n
He added that with the loan approval, the IMF also agreed to
\nextend its aid program by another year until 2003.<\/p>\n
In Washington Dow Jones reported the IMF as saying the
\nextension was expected to \"provide time\" for \"reforms envisaged
\nin the (IMF) program to take hold.\"<\/p>\n
The new loans form part of a $5 billion aid package for
\nIndonesia tied to quarterly reform programs which are set out
\nunder the Letter of Intent (LoI).<\/p>\n
The latest loan tranche approval by the IMF's executives
\ncomes on the back of last month's LoI signing, the fourth since
\n2000.<\/p>\n
In it the government has also asked for a one-year
\nextension of the IMF's program, which should have expired in
\nDecember 2001.<\/p>\n
A working IMF program is mandatory in securing a debt
\nrestructuring deal with creditor nations of the Paris Club.<\/p>\n
The government hopes to cut state budget spending by
\ndefering some $3 billion in sovereign debts due for payment this
\nyear.<\/p>\n
Since the government took over late last July, it has
\nquickly warmed up to the IMF, which had put on hold its aid
\nprogram for eight months under former President Abdurrahman
\nWahid's often erratic rule.<\/p>\n
The signing of the third LoI last August broke the ice
\nwith other creditor nations, paving the way for new loan
\ncommittment and debt restructuring talks.<\/p>\n
The IMF was pleased with the smooth sale process for a 51
\npercent stake in Bank Central Asia (BCA), which in the past had
\nbeen a source of contention between the Fund and the government.
\nBCA, in which the government owns a majority stake, has
\nattracated a number of foreign investors, most notably the
\nBritish based Standard Chartered Bank Plc.<\/p>\n
But while the government was able to mend ties with its
\ninternational creditors, criticism has mounted on it for losing
\ntouch with priorities at grassroots levels.<\/p>\n
Its decision to hike fuel, power and telephone rates
\nsimultanously this month led to sharp increases of basic food
\nstaple prices, stoking inflation which hurts the low income group
\nthe most.<\/p>\n
Analysts predicted an inflation rate of well above 1
\npercent this month alone, in part also because of the left over
\neffect from last monthUs festive seasons. The government hopes to
\ncontain the inflation rate at 9 percent for the whole of this
\nyear.<\/p>\n
All this comes as the government plans to offer an up to
\n10 year grace period for debtors who have been evading debt
\npayments amounting to billions of U.S. dollars. Bank analysts
\ndismissed the plan as unfair.<\/p>\n
The governmentUs ability to secure the IMF loan disbursement
\nhas helped instill some of the confidence that was lost over the
\npast few weeks.<\/p>\n
In the financial market, news of the IMF's loan approval
\nbolstered the rupiah and the stock index.<\/p>\n
On Tuesday, the rupiah reversed its decline to end the
\nstronger at 10,300 against the U.S. dollar from 10,405 a day earlier.<\/p>\n
A positive impact was also felt in the stock market,
\nwhere the index rose to 446.84 from 441.56 the day before.<\/p>\n
Foreign investors have been seen returning to the local
\nstock market since yearly this year, a further sign of an
\nimproved investment climate here, said the IMF last week.<\/p>\n
The Fund foresaw recovering foreign investment, providing
\nthe government could maintain its reforms path. Last year,
\nforeign direct investment approvals fell sharp by over 40
\npercent from the year earlier, mainly as the investment climate was held hostage by nearly six months of political instability.<\/p>",
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