IMF expected to disburse $400 million next month<\/p>\n
JAKARTA (JP): The International Monetary Fund (IMF) is
\nexpected to disburse before the end of December another US$400
\nmillion of the $5 billion committed to bail out Indonesia,
\naccording to Coordinating Minister for the Economy Rizal Ramli.<\/p>\n
Rizal said on Tuesday that a group of senior government
\nofficials and a visiting IMF team had completed the first week of
\nthe technical review of the country's economics reform program,
\nand the review would continue later this month following House
\napproval of the 2001 state budget draft.<\/p>\n
\"We will propose a new letter of intent (LoI) in December,\" he
\ntold reporters following a meeting between senior ministers and
\nthe IMF team led by its deputy director for Asia Pacific, Anoop
\nSingh.<\/p>\n
The IMF agreed early this year to provide the country with a
\ntotal of $5 billion to help finance a three-year economics reform
\nprogram. The IMF so far has disbursed about $1 billion.<\/p>\n
The next tranche, expected to be around $400 million, will be
\nreleased only after the IMF executive board approves the
\ncountry's new LoI, which outlines the various elements of the
\neconomic reform program and the time table for implementation.
\nThe new LoI will be made after the joint review has been
\ncompleted.<\/p>\n
Rizal said the government expected economic growth this year
\nto be between 4.5 percent and 5.0 percent.<\/p>\n
\"And there is still a concern on inflation,\" he said, adding
\nthat the government and the central bank had agreed to closely
\nmonitor price development and to take necessary measures to
\nensure that inflation would be below the government target.<\/p>\n
The government initially projected inflation to reach 7.0
\npercent this year, but it recently revised the target to 8.0
\npercent.<\/p>\n
\"Inflation is likely to increase slightly due to a weak
\ncurrency and recent price adjustments in electricity, telephone
\nand fuel products,\" Rizal said.<\/p>\n
But several analysts have warned the government and the
\ncentral bank of the danger of inflationary pressure because of
\nthe weakening currency and greater demand on goods and services.<\/p>\n
Bank Indonesia has raised its benchmark interest rate to more
\nthan 13.8 percent in a bid to defend the rupiah and curb
\ninflation. But the tight monetary policy could impede economic
\ngrowth.<\/p>\n
Rizal said that the government shared the IMF view that the
\ncurrent \"windfall gain\" from high oil prices should be used
\nprudently, including to reduce external debt.<\/p>\n
\"The House will be consulted on this,\" he said.<\/p>\n
There has been concern that the use of the windfall to finance
\ninfrastructure projects would trigger inflation.<\/p>\n
On the asset disposal program of the Indonesian Bank
\nRestructuring Agency (IBRA), Rizal said that the government and
\nthe IMF agreed on the importance of accelerating asset sales to
\nsupport economic recovery.<\/p>\n
\"The new IBRA chairman has already stated that this will be
\nhis main priority in the next few months,\" he said.<\/p>\n
The government was recently criticized by the IMF over the
\ndelay in the sale of government ownership in the publicly listed
\nBank Central Asia (BCA) and Bank Niaga. The government made the
\ndelay due to unfavorable market conditions and a recommendation
\nfrom the House.<\/p>\n
IBRA chairman Edwin Gerungan said that the sale of BCA would
\nbe concluded in March 2001.<\/p>\n
Rizal said that the government and the IMF were working out
\nbasic principles that would ensure greater transparency and
\nfinancial soundness in corporate restructuring.<\/p>\n
Meanwhile, Singh declined to comment on the plans of Bank
\nIndonesia to curb speculation including by lowering the daily
\nmaximum $5 million open forward position.<\/p>\n
\"I still have to discuss it with Bank Indonesia,\" Singh said.<\/p>\n
\"But I can tell you that BI has absolutely assured us that
\nthey are committed to maintain the current exchange rate system,\"
\nhe said.<\/p>\n
\"Any fine tuning that they might do would be consistent with
\nthe existing framework,\" he added.<\/p>\n
Singh also said that the current level of the exchange rate of
\nthe rupiah against the U.S. dollar was already \"well below its
\neconomic fundamentals.\"<\/p>\n
He said that the rupiah could only be strengthened if the
\ngovernment was consistent in implementing the agreed economics
\nreform program.<\/p>\n
The rupiah has weakened over the past couple of months.
\nCompared to the beginning of this year, the rupiah has dropped by
\nabout 20 percent to the current level of about Rp 9,100 per U.S.
\ndollar.<\/p>\n
Central bank officials have recently said that measures would
\nbe taken to curb speculation in the local currency, prompting
\nmarket players to think that the government and the IMF would
\ninitiate some form of currency control.(rei)<\/p>",
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