Economists welcome $347 IMF loan tranche
The Jakarta Post, Jakarta
The approval of the International Monetary Fund US$347 million loan tranche for the country would have a positive impact on the economy as it would further lift investor sentiment, economists said.
But they reiterated that the government would have to press ahead with the implementation of key reform programs to maintain the positive sentiment.
"The IMF loan (approval) is very positive news," said former finance minister Bambang Sudibyo, pointing out that it should further strengthen the rupiah, a cornerstone of the country's economic recovery program.
He, however, warned against complacency because there was still a lot of work to be done by the government, particularly in the areas of corporate and bank restructuring, macro-economic stability and fiscal consolidation.
Jakarta-based Standard Chartered Bank economist, Fauzi Ichsan, said that although the news had been factored in by the market, it would still lift investor sentiment.
"(But) the government must implement the LoI to maintain the positive momentum," he said, referring to the Letter of Intent, which contains a set of reform targets demanded by the IMF.
"The government must push ahead with the Bank Niaga sale plan and privatization program," he added.
The IMF executive board in Washington agreed on Friday to disburse the next $347 million loan tranche to the country. The money will be kept in the Bank Indonesia vault to back up foreign exchange reserves.
"In their early implementation of the program adopted for 2002, the Indonesian authorities have signaled a determination to consolidate the progress made so far and build a solid foundation for future economic recovery," IMF First Deputy Managing Director Anne Krueger said in a statement.
"The program deserves the continued strong support of the international community."
But the Fund also warned that the government must push ahead with the implementation of fiscal reform, which among other things, includes corporate restructuring, asset sales and revamping the legal and judicial system.
The IMF is providing a US$4.6 billion loan program for Indonesia to help the economy to recover, from the ongoing economic crisis which began in 1997. The program will last until the end of next year.
The IMF loan is the second major bit of positive news for the country after the government recently secured a debt rescheduling agreement from the Paris Club of creditor nations over some $5.4 billion sovereign debts maturing this year and next.
The debt rescheduling was seen as crucial to keep the state budget deficit at a relatively safe level.
The successful sale of the government's 51 percent stake in Bank Central Asia (BCA), the country's largest retail bank, and the Paris Club deal pushed the value of the rupiah 10 percent higher against the U.S. dollar since the start of the year. Bullish sentiment has also prevailed in the stock market, which has been called one of the best performers in Southeast Asia of late.
The rupiah was quoted higher at Rp 9,300 on Friday, and should test Rp 9,200 this week, while stocks were down 4.62 points at 539.96 on profit taking. The local markets were already closed when the IMF announced the loan approval.
The government is now preparing to sell another controlling stake in Bank Niaga. The Indonesian Bank Restructuring Agency (IBRA) has shortlisted four bidders.
Analysts do not expect any disruption in the sale process of Bank Niaga, particularly because of the relatively smaller size of the bank compared to BCA, which saw some fairly large employee protests ahead of the sale.
Bank Niaga and BCA are just two of the many assets that were taken over by IBRA from the ailing banking industry and indebted bank owners in the late 1990s. The agency is mandated to restructure and privatize the assets.