Government, IMF 'agree' on central bank issue

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)