Government, IMF 'agree' on central bank issue

JAKARTA (JP): The government and the International Monetary Fund "have bridged their differences" over the controversial amendment of the central bank law, Coordinating Minister for the Economy Rizal Ramli said on Monday.

Rizal said that the government and the IMF had agreed to form a panel of experts consisting of two former central bank top officials from Canada and Brazil and two from Indonesia to review and provide input to the government-proposed bill on the amendment of the existing central bank law.

"Fischer and I had some very good discussions regarding the proposed amendments to the central bank law and we are in full agreement regarding the need to ensure that Bank Indonesia maintains its independence while efforts are made to make it more accountable ... We also agreed to steps that will be taken to address the concerns of the IMF regarding those amendments while also ensuring that the review of the IMF program moves forward in a timely manner," Rizal said in a press statement.

Last week, Rizal met with IMF first deputy managing director Stanley Fischer in Washington in a bid to fix worsening relations with the Fund.

The amendment of the central bank law had been a factor prompting the IMF in December to delay the disbursement of its next US$400 million loan to Indonesia.

The House of Representatives had delayed the deliberation process of the proposed bill on the amendment of the central bank law until March 12.

The IMF had earlier expressed concern that the amendment process would threaten the independence of Bank Indonesia, but the government had insisted that it was needed to boost the accountability of Bank Indonesia particularly following massive mismanagement and corrupt practices in the past.

Rizal, however, could not confirm when the Fund would release its loan. The IMF loan is seen as a key factor to help revive investor confidence in the ailing economy. Other assistance promised by other multilateral institutions would also depend on the release of the IMF money.

Rizal said that the government was "finalizing the dates for the timely visit" of the IMF mission to jointly prepare the country's next letter of intent (LOI).

The LOI basically contains a list of various economic reform programs to be implemented by the government. The IMF would only disburse its loan after the Fund's board of directors approve the LOI.

Elsewhere, Rizal said that the government had basically implemented the key reform programs promised under the previous LOI to the IMF.

He pointed out that the Indonesian Bank Restructuring Agency (IBRA) had raised more than Rp 20 trillion in proceeds from the sale of banking assets, which was more than the Rp 18.9 trillion target set for 2000.

The Jakarta Initiative Task Force has also managed to help restructure around US$9 billion worth of private sector overseas debt last year compared to the target of $8 billion, he said.

"In general, the IMF has recognized that we have achieved many of the programs mentioned in the (previous) LOI. If there is a difference, it is related to the change of the (political) environment in Indonesia," Rizal said in a brief press conference.

He explained that under the current democratic environment, the government could not move quickly enough in the implementation of its economic programs because in some cases it is obliged to first seek the approval of the legislature.

He pointed out as an example the planned sale of government ownership in Bank Central Asia (BCA) and Bank Niaga.

The divestment was supposed to be completed late last year, but was delayed after the government failed to obtain approval by the legislature. The IMF was deeply disappointed by the delay.

"The legislature is no longer a rubber stamp legislature as it was in the past," Rizal said.

Elsewhere, Rizal said that he had convinced the IMF on the need to replace the existing Bank Indonesia board of governors in a bid to help create a credible central bank.

He said that the image of Bank Indonesia had been tarnished by mismanagement and corrupt practices in the past.

Rizal also said that in a meeting with U.S. Treasury Secretary Paul O'Neill, the U.S. government had promised to continue to support Indonesia while it is in a process of transition toward democracy.(rei)