IMF team to leave without LoI deal<\/p>\n
JAKARTA (JP): The government and the International Monetary
\nFunds (IMF) finalized on Friday the draft of the next Letter of
\nIntent (LoI), but failed to ink a deal which may set back the
\nIMF's US$400 million loan tranche disbursement until September.<\/p>\n
Coordinating Minister for the Economy Burhanuddin Abdullah
\nsaid the government had concluded talks with the visiting IMF
\nteam on the economic programs covered by the LoI.<\/p>\n
\"The IMF mission will submit the government's draft LoI for
\nconsideration by IMF management,\" Burhanuddin said at a press
\nmeeting.<\/p>\n
He said the signing of the LoI and the subsequent loan tranche
\ndisbursement would come after IMF Executive Board approval had
\nbeen given.<\/p>\n
\"We expect the entire LoI process from the signing, review, to
\nthe long-awaited loan tranche disbursement to be finished before
\nthe September meeting of the Paris Club,\" he explained.<\/p>\n
He said the Paris club would meet in early September. It
\ngroups together bilateral creditors of Indonesia for the purpose
\nof rescheduling the country's sovereign debt.<\/p>\n
The Paris Club of creditor nations agreed last year to
\nreschedule some $5.8 billion of the country's sovereign debt due
\nto mature this year. But a debt rescheduling deal will only
\nbecome effective if Indonesia manages to abide by, or renew, its
\nLoI.<\/p>\n
The LoI contains a set of economic reforms targets, the
\nfulfillment of which is a prerequisite to IMF loan disbursement.<\/p>\n
Indonesia missed out on several targets under the previous
\nLoI, prompting the IMF to delay its $400 million loan tranche
\nsince last December.<\/p>\n
Top government officials had earlier expressed optimism that
\nthey could sign a LoI agreement this week.<\/p>\n
Burhanuddin said he was confident a deal could be reached
\nbefore the Paris Club meeting.<\/p>\n
\"Experience tells me so, unless something extraordinary
\nhappens,\" he said.<\/p>\n
This \"extraordinary\" something could be the outcome of
\nPresident Abdurrahman Wahid's impeachment hearing on August 1, or
\neven earlier.<\/p>\n
Fears persist that the power struggle among the politicians
\ncould spark violence at the grassroots level.<\/p>\n
Also, Burhanuddin's optimism could well prove to be ill-
\nfounded as, according to sources, the IMF's Board of Directors
\nwill be in recess starting next week until August 22.<\/p>\n
He went on to say that the LoI contained only 35 points or
\nparagraphs, as against over 60 in the previous letter.<\/p>\n
However, Burhanuddin refused to comment on the details of the
\nLoI draft.<\/p>\n
Broadly, the LoI covered four key areas.<\/p>\n
The first area covered monetary policies aimed at lowering
\ninflationary pressures, while the second area dealt with measures
\nto reinforce fiscal sustainability.<\/p>\n
Included in the second area were efforts to accelerate the
\nprivatization of state enterprises, the sale of assets under the
\nIndonesian Bank Restructuring Agency (IBRA), the restructuring of
\nprivate sector debts under the Jakarta Initiative Task Force
\n(JITF), and measures concerning regional autonomy and fiscal
\ndecentralization.<\/p>\n
In the third area, the government had reiterated its
\ncommitment to achieving the quantitative targets associated with
\nthe above objectives. No figures were disclosed on these targets.<\/p>\n
JITF chairman Bacelius Ruru said the LoI draft required his
\noffice to restructure $18 billion in debts, of which
\nrestructuring schemes covering $12 billion had already been in
\nplace since June.<\/p>\n
The fourth area concerned good corporate governance and legal
\nreform, Burhanuddin went on.<\/p>\n
The LoI draft followed an eight-day-long visit by an IMF
\nspecial mission, led by its Asia Pacific Deputy Director Anoop
\nSingh.<\/p>\n
Singh said the LoI draft was the first of three stages leading
\nto the disbursement of IMF loans.<\/p>\n
The next step would be the IMF management review, which he
\nsaid might take a few weeks. The third stage would follow with
\nconsideration of the LoI by the IMF's Executive Board.<\/p>\n
\"Our strategic objective is to complete the Executive Board
\nmeeting well before the Sept. 8 meeting of the Paris Club. In
\nfact, we will be trying our best to accelerate our work so that
\nall the three steps can be in place, if possible, by the end of
\nAugust,\" Singh said.(bkm)<\/p>",
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