Government proposes to IMF several options on central bank law

JAKARTA (JP): New Coordinating Minister for the Economy Burhanuddin Abdullah said on Tuesday he had proposed to the International Monetary Fund (IMF) "several options" to end the current row over the amendment of the central bank law.

Burhanuddin said the options included revising the government- proposed amendments to the Bank Indonesia law.

"I met with John Dodsworth (IMF representative in Jakarta) yesterday (Monday) and we held a long discussion about various issues ... regarding the amendment of the Bank Indonesia law. We have proposed several options," he said following a meeting with other senior economics ministers.

Burhanuddin said on Monday he would immediately hold talks with the IMF to resolve the controversy over the amendment of the central bank law, the only remaining stumbling block to the disbursement of the next IMF loan tranche to the country.

Asked when the IMF would send its review team to Jakarta, a necessary prelude for the release of the fund's money, Burhanuddin said no date had been set.

"Dodsworth said yesterday (Monday) that he would have to report to Washington first. So we'll have to wait for the information from (the IMF headquarters)," he said.

Burhanuddin, who was appointed the new economics czar last week to replace Rizal Ramli, who is now the finance minister, said on Monday he was hopeful the IMF would send its team to Jakarta soon to review the country's economic reform programs.

He said the government had met two of the three conditions set by the fund for the dispatch of the team. The first condition was that the House of Representatives approve the 2001 state budget revision, which it did. The second was that the government put on hold its plan to issue bonds backed by the country's gas sales. The third condition, which has yet to be fulfilled, is related to the amendment of the central bank law.

Analysts expect Burhanuddin, a former Bank Indonesia deputy governor who also worked at the IMF headquarters in Washington in the early 1990s, may be able to mend the prickly relations between the government and the IMF.

The fund, which is providing about US$5 billion in loans to the country, delayed the disbursement of its third loan tranche last December.

The government proposed to the House last November a bill to amend the current central bank law, enacted in May 1999, to boost the accountability of the independent central bank and weed out corruption inherited from the past regime.

But critics, including the IMF, are concerned that the proposed amendment may jeopardize the hard-won independency of Bank Indonesia.

The dispute over the proposed bill centers on Article 75, which stipulates that the current Bank Indonesia board of governors must resign once the House has approved the bill.

An independent panel jointly set up by the IMF and the government to review the bill, said Article 75 was a "serious mistake", pointing out that the government could use the article to oust future Bank Indonesia boards of governors whose monetary policies displeased the government. The IMF has demanded the government fully adopt the recommendations of the panel, including dropping Article 75.

A senior government official said earlier the government had agreed to revise the disputed article.

The bill on the amendment of the central bank law is currently being debated by the House.

Separately, the head of the House team debating the bill, Theo Toemion, lambasted the IMF for its interference.

Theo said that while the government had agreed to drop Article 75, the IMF now wanted to revise another article which had been agreed to by the government and legislators.

He said the IMF insisted that the new supervisory board of Bank Indonesia must not only focus on overseeing the performance of the central bank's board of governors, but also take part in the selection of the governors and deputy governors.

"The IMF wants all the recommendations of the joint panel to be implemented. This is not right. We are a sovereign country," Theo said following a meeting with Minister of Finance Rizal Ramli, who took the lead in proposing the amendment of the central bank law when he was coordinating minister for the economy. (rei)