Delay in IMF loan clarified

Delay in IMF loan clarified

JAKARTA (JP): Coordinating Minister for the Economy Rizal
Ramli said on Friday that the delay in the disbursement of the
International Monetary Fund (IMF) loan was due to technical
matters and not because the government had failed to implement
key economic reform programs.

Rizal explained that discussions between the government and
IMF officials to review the country's reform programs had to be
extended until January due to year-end festivities.

Speaking to reporters at his office, he added that there was
no serious problem with the IMF that would lead the fund to
cancel its bailout loan to the country.

But Rizal also said the IMF loan was not very important for
the country at the moment because of the current high foreign
exchange reserves level, estimated at more than US$29 billion.

"The IMF loan is only for a second line of defense," he said.

Rizal was responding to reports that the IMF had postponed the
disbursement of a $400 million loan tranche, initially scheduled
for December, until February or March.

Reports said the IMF was disappointed with the government
because of its failure in meeting several key economic reform
targets.

The IMF promised in January last year to provide the
administration of President Abdurrahman Wahid with some $5
billion in loans to help finance the country's three-year
economic reform program. The fund has so far disbursed about $1
billion.

The IMF normally disburses its loan after its executive board
convenes in Washington to review government performance in
implementing key economic programs based on the input provided by
the fund's review team in Jakarta.

The IMF review team was supposed to complete its work this
month.

But before the review started, the IMF had been disappointed
by several economic policies taken by the government.

For instance, the government decided in November to delay the
sale of its ownership in publicly listed Bank Central Asia (BCA)
and Bank Niaga until the first quarter of 2001 from the initial
schedule of December this year.

The sale of BCA and Niaga is part of the government's key bank
restructuring program. The proceeds were expected to contribute
to the Rp 18.9 trillion ($2 billion) cash target to be raised by
the Indonesian Bank Restructuring Agency (IBRA) to help finance
the 2000 budget deficit.

So far IBRA has raised more than Rp 16 trillion.

The sale of BCA and Niaga was also expected to help revive
investor confidence in the country's ailing economy.

Reports have also said the IMF was disappointed with the way
the government plans to implement the regional and fiscal
decentralization policy early next year.

The IMF has expressed concern that the new policy, which will
boost the administrative power of provinces, regencies and
mayoralties in managing their economic affairs, could prompt
regional governments to jump into a borrowing spree to finance
their administration, but which would then jeopardize the overall
economy, as experienced in other countries like China.

The fund has demanded the government issue a ruling
specifically forbidding the regional administrations to make
borrowings, but the central government followed the advice only
after IMF officials reportedly made threats to delay the loan
disbursement.

Reports have also said the fund had been deeply concerned with
the government's political maneuvering to amend the central bank
law which many believe was mainly aimed at removing legal
obstacles to oust Bank Indonesia Governor Sjahril Sabirin.

Meanwhile, the rupiah ended higher late on Friday at Rp 9,380
to the U.S. dollar compared to Rp 9,430 on Thursday, despite the
media reports of the loan disbursement delay.

In the past, any prospect of possible delays in the
disbursement of the IMF loan would affect sentiment and push the
rupiah lower.

Dealers said state banks sold dollars on Friday, possibly on
behalf of Bank Indonesia, which had vowed to continue market
intervention to help the ailing rupiah and curb inflation.

A lower value of the rupiah would push inflation higher
because of the high import content in the country's production
system.

Dealers also said the market had expected possible delays in
the disbursement of the IMF loan.

This is the second delay of a loan disbursement. The fund
first delayed its loan to Indonesia last year during the
administration of former president B.J. Habibie, which tried to
slow down the implementation of several key reform programs due
to the controversy surrounding the high-profile Bank Bali
scandal. (rei)