IMF approves latest RI loan tranche<\/p>\n
Dadan Wijaksana, The Jakarta Post, Jakarta<\/p>\n
The International Monetary Fund (IMF) has approved another US$486
\nmillion in a fresh loan to Indonesia as the government prepares
\nto end the current program with the Fund later this year.<\/p>\n
The decision was made on Wednesday in Washington by the IMF
\nexecutive board after it approved the country's latest economic
\nreform agenda.<\/p>\n
The financial market was not affected by the news as investors
\nhad already anticipated it. The rupiah, which has been rising
\nrapidly against the U.S. dollar in the past couple of months,
\nended lower at Rp 8,260 per U.S. dollar from Rp 8,230 the
\nprevious day.<\/p>\n
\"The Indonesian authorities are to be commended for their
\ncontinued strong policy performance under the arrangement with
\nthe Fund,\" IMF Deputy Managing Director Shigemitsu Sugisaki said
\nin a statement.<\/p>\n
The IMF said that Indonesia was on track to achieve the full-
\nyear state budget deficit target of 1.8 percent of gross domestic
\nproduct (GDP). Progress has also been made in the financial
\nsector, with the bank divestment program largely on track, as
\nwell as the privatization of state-owned enterprises.<\/p>\n
\"The divestment of Bank Danamon was recently concluded, the
\ntimetable for Bank Lippo has been announced and the initial
\npublic offering (IPO) of the country's largest bank, Bank Mandiri
\nis expected to be concluded shortly.\"<\/p>\n
The IMF welcomed such progress, saying: \"Sustained strong
\nprogress in the government's comprehensive reform agenda will be
\nkey to improving Indonesia's investment climate and maintaining
\nmarket confidence.\"<\/p>\n
However, there is still plenty of homework to be done to reach
\nsuch a level.<\/p>\n
\"Priorities are legal and judicial reform, including the
\nestablishment of the Anticorruption Commission, the adoption of
\namendments to the bankruptcy law and the reform of the Commercial
\nCourt.\"<\/p>\n
The current five-year IMF program, which started in 1999, was
\nmeant to help regain investor confidence in the country's economy
\nby adopting a number of tough economic reform measures. The Fund
\ndisburses its loan in several tranches to help support the
\ncountry's balance of payment. But in return, the country must
\ncarry out the reform program.<\/p>\n
The latest loan brings the total IMF loan to $4 billion out of
\na promised $5 billion package.<\/p>\n
Amid strong public pressure, the government is now determined
\nnot to extend the IMF program when it expires at the end of this
\nyear.<\/p>\n
Hubert Neiss, who led the IMF team in talks with the
\ngovernment when the country first entered the Fund-sponsored
\nbailout program, supported the plan to exit the program.<\/p>\n
But he warned that it was crucial for the government to
\ncontinue the reform program to maintain investor confidence in
\nthe economy.<\/p>\n
\"Right now, Indonesia is strong enough to leave the program.
\nIt seems to me, the balance of payment will be strong enough that
\nthe Indonesian situation is manageable without recourse to IMF
\nfinancing,\" Neiss, now a senior adviser at Deutsche Bank, told
\nThe Jakarta Post.<\/p>\n
\"So, in principle, Indonesia can exit the program by the time
\nit expires. But the other important point is that Indonesia has
\nto exit in a way that market confidence is preserved and that
\ndepends mostly on the government's policies.\"<\/p>",
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