Fourth LoI could be signed soon: IMF
Berni K. Moestafa, The Jakarta Post, Jakarta
The International Monetary Fund, or IMF, indicated Monday that the government may be signing its fourth lending agreement with the organiztion as early as this year.
The IMF's senior representative for Indonesia, David C. Nellor, said the fourth Letter of Intent (LoI) could be signed over the next few days.
"I can't give you a precise date, but it won't be too much longer from now," he said. When further pressed, he added, "sure, it could be this year."
The LoI contains a set of economic reform targets that the government must meet to receive the IMF loans.
The signing of the fourth LoI would allow the disbursement of a US$400 million worth of loan tranche to Indonesia.
The loans are part of a three-year economic reform program for which the IMF holds ready a $5 billion worth aid package.
However, the disbursements must await the approval of the IMF executive board, which will meet after the Lol has been signed.
Nellor said the IMF executive board may meet early January.
"There are two steps we have to see: one, the Letter of Intent would be signed; step two, the executive board would meet and consider the review and if the executive board approves the review then the funds are disbursed straight away," he explained.
Finance Minister Boediono has said earlier that he was hoping to tap the IMF loans this year, on the confidence of securing an LoI deal by mid December.
The signing of the LoI follows last month's agreement between the government, and an IMF team on the draft of the LoI.
One of the LoI drafts, dated Nov. 13, outlines 47 points that cover various areas of reform for the country's economy.
Among the targets mentioned by the draft is to lower the rate of inflation rate to between 9 to 10 percent from this year's estimated 12 percent.
This implies Bank Indonesia must keep its interest rates high in order to ease inflationary pressure, thereby reducing the supply of money in circulation.
Other targets call for further cuts in fuel subsidy spending, strengthening the tax administration, and the sale of Bank Niaga by mid-2002.
The LoI draft also sets a privatization target of Rp 6 trillion (about $576 million) for next year.
Nellor said the government has nearly met all targets contained under the third LoI, which was signed last August.
The third LoI signing followed an eight-month long suspension of the IMF loan program, as it responded to signs the government was wavering on its reforms commitment.
A resumption of the program was made possible with the election of a new government under which groups together a credible economic team.
"We think the government has a sound reforms program in place which, if implemented, should see an improvement in the economic circumstances," Nellor said at a press briefing that followed a seminar on privatization by the business consultancy firm, CastleAsia.