Government sends latest letter of intent to IMF

Government sends latest letter of intent to IMF

Dow Jones, Jakarta

The International Monetary Fund said Wednesday it had received the latest letter of intent from the Indonesian government, which should pave the way for the next installment of loans under a $5 billion lending program.

The letter of intent - in which the Indonesian government promises economic reforms in return for loans - will go to the IMF's board in Washington D.C. in early December, said David Nellor, the Fund's Jakarta representative.

The next loan tranche, if approved by the Fund's board, is worth $300 million-$400 million.

Indonesia needs the IMF program and it's attached economic reforms to restore confidence in the country.

According to the latest letter of intent, Indonesia has made some progress in meeting reform commitments under it's previous letter of intent to the fund, Nellor said.

The government has proposed a budget for 2003 which should maintain macroeconomic stability and has taken steps to make it's public debt more manageable.

Jakarta has also taken steps to raise funds from the sale of assets taken over from the banking sector since the 1997 financial crisis.

The Indonesian Bank Restructuring Agency has raised Rp 30.7 trillion (US$3.4 billion) of its 2002 target of Rp 42.8 trillion so far this year, its Chairman Syafruddin Temenggung said Tuesday.

Syafruddin added that he's optimistic the agency will be able to raise the remaining Rp 12.1 trillion by the end of the year.

IBRA recently got Rp 1.02 trillion from the sale of a 51 percent stake in PT Bank Niaga to Commerce Asset Holding Bhd., Malaysia's second-biggest financial services group.

It is also in the process of selling thousands of property assets and bank bad loans.

The government will use the proceeds to help finance the deficit in the state budget.

In early August the IMF praised Indonesia for reducing expenditures, and reining in the budget deficit, which will total 2.5 percent of gross domestic product this year, down from 3.7 percent last year.