Economy shows encouraging progress: IMF

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.