Economy shows encouraging progress: IMF

Dadan Wijaksana, The Jakarta Post, Jakarta

The International Monetary Fund (IMF) gave a positive report on the Indonesian economy on Monday, saying that macro economic indicators in the first few months of the year were encouraging.

IMF senior advisor for Asia Pacific Daniel Citrin urged the government to stick to the agreed reform program to maintain the current positive sentiment in the economy.

"There's been encouraging progress in the first months of the year. Under the program, the market sentiment has improved, the rupiah has started to strengthen, the (Bank Indonesia) rates are starting to come down.

"... But we have to make sure of continued forward momentum under the program," Citrin told reporters.

Citrin spearheads an IMF delegation to the country for a regular review on a set of economic reform programs called the letter of intent (LoI).

The LoI contains a set of targets by which the IMF measures Indonesia's progress in implementing economic reform. Failures on behalf of the government to meet the targets would lead to a halt in the IMF's lending program.

The IMF is sponsoring the program under a three-year US$5 billion loan package.

Citrin's statement shows another vote of confidence in the country's commitment to economic reform.

This follows IMF approval of a $347 million loan tranche for the country last month and willingness to waive several of the conditions under the three-year loan program to give Indonesia more time to carry out needed reforms.

Since the start of the year, Indonesia has managed to make significant progress in several of its key programs, which has been the cause of the revival of needed foreign confidence.

Progress in question includes, among other things, the sale of assets held by the Indonesian Bank Restructuring Agency (IBRA) and the approval by the House of Representatives of the government's privatization program for 2002.

Progress in the asset sale program includes the sale of government shares in Bank Central Asia (BCA), and the launch of the Bank Niaga divestment plan.

The positive development had lifted sentiment in the Indonesian market, both currency and stocks, to new heights.

The rupiah has appreciated by more than 10 percent of its value since the beginning of this year, while the Jakarta Stock Exchange Composite Index has jumped almost 40 percent. It is considered as one of the most best performing markets in the region.

Also helping the rupiah's upward movement was the Paris Club of creditor nations agreeing last April to reschedule Indonesia's debt repayments totaling $5.4 billion.

The benchmark interest rate on Bank Indonesia one-month SBI promissory notes has also been declining since the beginning of the year. The rate is now hovering at 16.20 percent compared to around 18 percent late last year.

Bank Indonesia has said that there is more room for a further cut in interest rates as inflationary pressures are easing.