Fischer sees resumption of RI loans

Fischer sees resumption of RI loans

TOKYO (Reuters): The International Monetary Fund (IMF) may be able to resume disbursement of funds to aid Indonesia's battered economy "reasonably soon", IMF First Deputy Managing Director Stanley Fischer said yesterday.

Fischer told a symposium in Tokyo that an IMF mission would return to Jakarta late this week or next week to resume talks on a review of Indonesia's reform program, put on hold by recent economic and political turmoil.

"The situation is especially difficult because of the extraordinary devaluation of the rupiah. But now that the political transition has taken place, there is a prospect of a return to the IMF program taking place reasonably soon," Fischer said.

Indonesia had received only a small slice of a $41.2 billion IMF-led rescue package when desperately needed loans were stalled by the political upheaval which led last month to the resignation of long-time leader Soeharto and his replacement by protege B.J. Habibie as president.

Weeks of social unrest and political upheaval have dragged the crippled economy further into depression and the IMF says the economic forecasts underpinning the reform program will have to be redone.

"There is in place in Indonesia an exceptionally strong economic team and it is likely that within a few days the IMF mission will return, possibly at the end of this week, early next week...to Jakarta to resume discussions on the completion of the review of the program," Fischer said.

"It would require a renegotiation of the macroeconomic aspects of the program, and that I expect will be done.

"And if things go as is reasonable to hope, it should be possible to resume disbursements to Indonesia after the review mission has reported back in a couple of weeks and after the papers are processed and considered by the board of the IMF," he added.

Fischer added that the IMF had already sent back its monetary mission to Jakarta to assist in the reform of the banking system and in carrying out a monetary system designed to keep inflation from getting out of hand and to bring the battered rupiah currency back to a "more reasonable value".

Talks among creditor bankers and Indonesian officials on restructuring the nation's mountainous corporate debt had made "important progress", Fischer said.

Fresh discussions are being held in Frankfurt this week.

"There is no question that negotiation has made important progress in the last few weeks and is on a good track towards an agreement, if not at this meeting, then at the next one," Fischer said, adding that such a deal would remove one worry from the foreign exchange market and allow the rupiah to strengthen.

"As that happens, I believe that confidence in the currency will begin to come back to Indonesia and that we will then have seen...that the first stage of the reform process, namely, the restoration of confidence and stability of the currency, will take place also in Indonesia. As that happens...interest rates will come down," Fischer said.