Government to resolve row with IMF over BI law

JAKARTA (JP): The new Coordinating Minister for the Economy Burhanuddin Abdullah said on Monday that he would immediately seek a resolution over the controversial amendment of Bank Indonesia law, which he said was the only remaining key factor hampering the disbursement of the IMF loan to the country.

Speaking to reporters following a meeting with Vice President Megawati Soekarnoputri, Burhanuddin said that he would hold talks with both the IMF and the House of Representatives to resolve the issue.

"The Vice President has agreed to explore various alternatives to accommodate the wish of the IMF ... and the legislators," he said.

Burhanuddin was also hopeful that the IMF would soon send its review team to Jakarta, a prelude for the disbursement of the IMF money.

He said that three of the conditions set by the IMF for the arrival of the Fund's mission team had been fulfilled by the government.

He pointed out that the House had approved the revision of the 2001 state budget and the government had decided to hold the plan to issue bonds backed up by sales of the country's natural gas.

The IMF, which is providing the country with a multi-billion dollar bailout loan, delayed the disbursement of its next US$400 million loan tranche in December last year amid signs that the government was wavering with the implementation of an agreed key economic reform program.

The proposed amendment of the central bank law by the administration of President Abdurrahman Wahid had further hurt relations between the IMF and the government.

The government insisted that the amendment was needed to root out corruption within Bank Indonesia, while some, including the IMF, were concerned that the amendment would jeopardize the hard won independence of the central bank, which was only obtained in 1999 with the implementation of the current law.

The main controversy centers on Article 75 of the government- proposed bill, which stipulates that the current board of governors of Bank Indonesia should resign once the new law becomes effective.

An independent panel jointly appointed by the IMF and the government has said that Article 75 was a "serious mistake," because the government could always use it against any future board of governors whose monetary policy does not please the government.

The IMF insisted that Article 75 could open the way for political interference in the central bank and demanded the government fully adopt the recommendations of the panel.

Critics have also said that the proposed amendment was merely designed to accommodate the wish of Abdurrahman who has long demanded the resignation of current Bank Indonesia Governor Sjahril Sabirin and his deputies.

Separately, IMF Jakarta representative John Dodsworth expressed optimism that Burhanuddin, previously a Bank Indonesia deputy governor who has also had a few years of experience at the IMF in Washington, could resolve the dispute over the amendment of the Bank Indonesia law.

"We are hopeful he will be able to formulate an acceptable proposal to resolve the issue," Dodsworth said on Monday.

He added that the IMF had started discussions with Burhanuddin about settling the central bank law issue.

Previously, a senior government official said that the government had agreed to revise Article 75 to accommodate the IMF's wish.

The government also plans to propose to the House a new article that would introduce a supervisory board to oversee members of Bank Indonesia's board of governors so as to improve their accountability.

The House and the government have yet to complete the debate over the proposed amendment of the central bank law.

Elsewhere, Burhanuddin said that Megawati highlighted the importance of the IMF's role in helping to resolve the country's economic woes.

"Megawati stressed the importance of improving relations with the IMF because we know that stronger relations with the IMF is one of the conditions required by the Paris Club (of creditor nations) to agree to reschedule around $2.8 billion in sovereign debt," he said.

The debt matures in the current budget year. Without the rescheduling facility, the current 2001 state budget could not be sustained.

Since his recent appointment, Buharnuddin has said that his main priority will be to seek ways to help improve government relations with the IMF. (dja/rei)