Economists welcome $347 IMF loan tranche

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.