DEN says govt may fail to meet IMF deadline again

JAKARTA (JP): Secretary of the National Economic Council (DEN) Sri Mulyani Indrawati said on Tuesday that the government might again fail to meet the deadline in the implementation of certain key reform programs as promised to the International Monetary Fund (IMF).

Sri, however, said that the delay in the reform measures, as stipulated in the May Letter of Intent (LoI) to the IMF, was "understandable" given the various challenges and complexities.

Sri said that in addition to the "extra work" by the administration, the implementation of the crucial reform program also required the cooperation of the legislative and judiciary institutions.

"I think it will be difficult to implement the LoI without the full cooperation of the legislative and judiciary institutions," she told reporters on the sidelines of a hearing session between the council and House of Representatives Commission V for industry and trade.

The National Business Development Council (DPUN) also participated in the session.

The government's economic reform programs and the deadlines for their implementation are contained in the LoI, which was signed in mid-May.

The government failed to meet the reform deadlines as set in the first LoI in January, prompting the IMF to postpone a second disbursement of its bailout loan to the country.

A delay in the implementation of the LoI might again prompt the IMF to delay the disbursement of a third loan tranche to the country, which is set for August.

The delay in the IMF loan in May resulted in a serious blow to market confidence and the exchange rate of the rupiah against the U.S. dollar.

Sri said that of the 53 items in the LoI agreed between the government and the IMF in May, there were several which would be difficult to be realized by the set deadline.

She cited the handling of uncooperative debtors of the Indonesian Bank Restructuring Agency (IBRA) as an example.

Sri said that the economics ministers and IBRA officials had yet to adopt the same vision on how to deal with the recalcitrant debtors.

"This is the most difficult obstacle to overcome. Maybe a presidential decree is needed, because this (problem) cannot be settled by the economics ministers alone," she said.

Coordinating Minister for the Economy, Finance and Industry Kwik Kian Gie and Minister of Finance Bambang Sudibyo have both vowed to take legal action, including asset seizure and prosecution against the bad debtors, but so far no debtors have been sanctioned.

Most of the debtors are well-connected businessmen, including the children and friends of former authoritarian president Soeharto.

IBRA has received some Rp 220 trillion worth of nonperforming loans (NPLs) from the country's banking sector. The agency is mandated to restructure and recover the NPLs.

IBRA's top priority, as stipulated in the LoI, is to focus on the restructuring of its top 21 debtors, which owe a combined debt of Rp 87.35 trillion.

According to the May LoI, IBRA must reach the stage of finalizing the restructuring of term sheets or initiating legal action against the uncooperative debtors for at least 35 percent of the nominal loan value of the top 21 debtors by the end of June.

The agency announced recently that it had reached an Memorandum of Understanding to restructure 28.45 percent of the Rp 87.35 trillion in loans, and to continue the litigation process on 7.02 percent of the loans.

Sri said that the second most difficult reform program to be implemented was a plan to introduce a body to oversee IBRA.

She said that it was difficult to find at least six people to run the body who could work full time and were not influenced by any political parties.

She said that the introduction of the body was initially meant to insulate IBRA, which controls massive assets worth more than Rp 600 trillion, from political intervention.

Sri added that the plan to introduce the body must be evaluated thoroughly to ensure it would not instead hamper the decision making process within the agency.

Meanwhile, head of DEN Emil Salim told legislators that IBRA must further improve its transparency and accountability to avoid massive political intervention.

He said this must be a top priority for the agency. (rei/cst)