IMF disburses loan<\/p>\n
The government should not let the high commendations of the
\nInternational Monetary Fund Executive Board in its seventh review
\nof Indonesia's policy performance last week go to its head, let
\nalone feel complacent and relaxed with regards to its reform
\nimplementation.<\/p>\n
The IMF completion of its review of Indonesia's performance
\nunder a SDR 3.63 billion (US$4.8 billion) Extended Fund Facility
\narrangement that was signed in February, 2000 with high
\ncommendations should indeed be welcomed as a new positive factor
\nthat will improve market confidence in the government and the
\ncountry's economic policies.<\/p>\n
The board's approval last week of the new reform agenda the
\ngovernment submitted in its seventh letter of intent (LOI) in the
\nthird week of November will similarly bolster the market
\nsentiment toward macroeconomic stability because the endorsement
\nopened the way for the release of a further SDR 275.24 million
\n($365 million) of the facility. The new LOI itself is the third
\nsupplement to the 53-point reform agreement that was signed with
\nthe IMF in December, 2001.<\/p>\n
The biggest positive impact of the IMF endorsement of
\nIndonesia's new reform agenda is not resulting from the loan
\ndisbursement as the loan will serve only as a second-line defense
\nin the country's balance of payments but from the positive signal
\nit conveys to the market that the country's reform agenda is
\nmoving along the right track.<\/p>\n
The IMF did praise what it sees as important progress in
\nreform implementation that has contributed to marked improvement
\nin macroeconomic fundamentals.<\/p>\n
However, the multilateral agency also warned of the
\ndeteriorating economic outlook as a result of the Oct. 12
\nterrorist bomb attack in Bali, stressing the importance of
\ncontinued firm execution of reform programs.<\/p>\n
The IMF representative in Jakarta David Nellor reiterated the
\nwarning in a statement on Wednesday, strongly suggesting that the
\ngovernment show stronger resolve in carrying out all the reforms
\nneeded to remove the woes that are deeply rooted in the economic
\ncrisis.<\/p>\n
Policy coherence and consistent implementation of reforms are
\nimperative not primarily because they are a condition attached by
\nIndonesia's international creditors (Consultative Group on
\nIndonesia) to its new loan and commitments.<\/p>\n
Both the IMF and the creditor consortium share the view that
\nwithout significant progress in banking, corporate, legal and
\njudicial reform and in the establishment of the rule of law as
\nwell as the privatization of state companies -- which form the
\ncore of the reform agenda -- no amount of foreign loans or grants
\ncan help Indonesia get out of its economic crisis.<\/p>\n
The continued recovery of bank and state enterprise assets are
\nan important element of the government's strategy to reduce the
\nlevel of public debt and consequently the sovereign risk and to
\nimprove the efficiency of the private and public sectors.
\nAccelerated progress in implementing legal and judicial reforms
\nand the rule of law is critical not only to improve governance
\nbut, more importantly, to reinvigorate the investment climate.<\/p>\n
It is private investment, both domestic and foreign, that has
\nbeen and will continue to be the driver of economic growth. The
\nrole of official foreign loans and grants is limited to helping
\nthe government manage its budget deficit at a sustainable level
\nand to being a catalyst with regard to maintaining international
\nconfidence in the country. The government's resource capacity
\nwill also be severely restricted at least for the next five to
\nseven years due to its huge debt burden.<\/p>\n
Private investment should therefore be reinvigorated by
\ncarrying out the reform measures described above.<\/p>\n
All the basic requirements to stimulate private investment
\nhave been covered by the reform agenda. Private investors are
\nfully aware that many of the reforms cannot be completed
\novernight. What they want to see is consistent implementation and
\npolicy coherence.<\/p>\n
Moreover, the government has only one year remaining, before
\nthe IMF facility expires next December, in which to prove to the
\nmarket that it is truly determined to push ahead with its
\nstructural reforms with or without the multilateral agency
\nconstantly looking over its shoulder.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/imf-disburses-loan-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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