Government proposes to IMF several options on central bank law

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)