Government, IMF to review new autonomy policy

JAKARTA (JP): The Coordinating Minister for the Economy Rizal Ramli said on Monday that the government would continue to discuss with the International Monetary Fund (IMF) ways to improve the implementation of the new regional autonomy law.

Rizal said that the review was needed due to unanticipated problems and the dynamics of the economy.

"We'll see. If it is positive (the input from the IMF), we'll listen and we'll improve it. That's our principle," he told reporters on the sidelines of a closed-door meeting with the House of Representatives over the amendment of the central bank law.

Rizal did not say what aspects would be discussed with the IMF and when it would be completed.

The government launched the new autonomy policy early this year under which provinces and regencies will have greater power in managing their social and economic affairs including fiscal policy.

The IMF has expressed concerns over the hastily prepared new autonomy law, particularly about the prospect that the newly empowered regions would embark on a borrowing binge to finance their greater administrative roles. If this were to happen, it could jeopardize the recovery process of the overall economy. The Fund has demanded that the government issues a regulation to prohibit the regions from borrowing.

The IMF, which is providing a multibillion dollar bailout fund for the country, is currently in the process of reviewing the government economic reform program. If the Fund approves the economic program, it will disburse its next loan tranche.

The IMF was supposed to disburse another US$400 million loan last year but it was delayed until February or March of this year.

But Rizal dismissed suggestion that the government had surrendered to pressure from the IMF.

"This is because we have goodwill," he said.

He said that there had been no specific agreement earlier between the government and the IMF over how to implement the new autonomy and fiscal decentralization policy.

Rizal also said that neither the IMF nor the government had fully anticipated the problems that might occur in the implementation of the regional autonomy law.

He said that one of the problems was the transfer of around 1.9 million government employees from the payroll of the central government to the payrolls of the local administrations.

"It was not anticipated that there would be around 1.9 million government employees to be transferred," he said.

Finance ministry officials have said that the central government had so far only managed to transfer around 900,000 government employees.

Meanwhile, Rizal said that the government had managed to complete nearly all of the key economic reform program targets set by the IMF.

He pointed out that the Indonesian Bank Restructuring Agency (IBRA) had managed to raise more than its Rp 19.9 trillion cash target, and the Jakarta Initiative Task Force (JITF) had managed to help restructure between US$8-10 billion in corporate overseas debt in the 2000 fiscal year ending in December.

"Regarding the budget deficit, the government has been more conservative," he said, pointing out that the deficit in 2000 was only around 3.5 percent of gross domestic product compared to initial projection of 4.8 percent of GDP.

One key economic program failed to be completed by the government last year was the sale of the government's majority stakes in the publicly-listed Bank Central Asia (BCA) and Bank Niaga.

The IMF has expressed disappointment over the delay in the sale of the two banks. The government now plans to sell the banks sometime in June this year. (rei)