IMF to release $372m loan to RI<\/p>\n
JAKARTA (JP): The International Monetary Fund approved in
\nWashington on Friday the disbursement of a US$372 million loan to
\nsupport economic reform program in Indonesia.<\/p>\n
The decision by the IMF's 24-member executive board came after
\na review of the country's three year economic program to meet
\nIMF-imposed economic conditions.<\/p>\n
\"Executive Directors welcomed Indonesia's recent progress in
\nimplementing important fiscal and structural reform measures. The
\nkey macroeconomic objectives for 2000 set out in the original
\nprogram remain within reach,\" IMF's First Deputy Managing
\nDirector Stanley Fischer said at the conclusion of the executive
\nboard discussions on Indonesia's reform program.<\/p>\n
The release will bring total disbursements to Indonesia under
\nthe Fund's $5 billion extended loan facility program to $715
\nmillion.<\/p>\n
The loan disbursement was delayed in April because of concerns
\nabout the progress of the economic reform program.<\/p>\n
Fischer said the country's economic reform program showed
\nencouraging results, with prices remaining stable and foreign
\nexchange reserves exceeding program targets.<\/p>\n
He also said that the real GDP growth had become significantly
\npositive in the last two quarters with the poverty rate also
\ndeclining from its 1998 peak.<\/p>\n
\"Nevertheless, the recent deterioration in market sentiment,
\nand the resulting decline in the rupiah and in the stock market,
\nunderscores the need for clear and consistent implementation of
\nthe program,\" he warned.<\/p>\n
According to Fischer, the keys to regaining market confidence
\nare to make steady and visible progress in program implementation
\nand to maintain clarity about the authorities' intentions and
\ncommitments.<\/p>\n
\"Critical priorities are the restoration of a sound banking
\nsystem and resolution of the overhang of corporate debt, to be
\nachieved amid conditions of improved governance,\" he said in a
\nstatement issued ahead of the visit of the IMF's new Managing
\nDirector to Indonesia Horst Koehler.<\/p>\n
Koehler, who is now in South Korea as part of his Asian tour,
\nis scheduled to meet President Abdurrahman Wahid on Sunday. The
\nIMF chief and the President are widely expected to discuss the
\ngovernment's plan to impose a capital control in a bid to arrest
\nthe continued fall in the Indonesian currency.<\/p>\n
Despite some delays, important progress has been made in
\nfinancial sector restructuring, notably with regard to the
\nrecapitalization of state banks, and the sale of assets by the
\nIndonesian Bank Restructuring Agency (IBRA), he noted.<\/p>\n
He said short-term priorities should include completing the
\nrestructuring and recapitalization of the state banks; preparing
\nthe IBRA banks for privatization; accelerating IBRA's asset
\nrecovery; publishing IBRA's 1999 audited accounts; and
\nstrengthening Bank Indonesia's supervision.<\/p>\n
Early establishment of an independent and accountable
\ngoverning body for IBRA was essential given the size of the
\nassets under its control and its pivotal role in debt
\nrestructuring, Fischer said.<\/p>\n
\"The government has now put in place all the elements of an
\nenhanced debt-restructuring framework for the corporate sector,
\ncentered around a strengthened Jakarta Initiative Task Force and
\nunderpinned by specific measures to increase the legal deterrent
\non noncooperative debtors,\" he added.<\/p>\n
In the statement, Fischer also said that an orderly sequencing
\nof fiscal decentralization was one of the key challenges facing
\nIndonesian authorities in the coming months, and crucial for
\nmaintaining fiscal sustainability.<\/p>\n
\"The authorities are cognizant of the risks involved and are
\ntaking steps to contain them,\" he said. \"However, the operation
\nis complicated and its risks remain high; strong safeguards will
\nbe necessary to protect the overall economic program,\" he added.<\/p>\n
Indonesia, dogged by political turmoil and persistent domestic
\ndoubts about the merits of IMF-sponsored economic reforms, was
\nthe second victim of the painful Asian economic crisis of 1997-
\n99. It won a $40 billion international rescue package in late
\n1997 after the crash of its currency exposed debts and other huge
\nproblems in the banking sector. (hen)<\/p>",
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