Government to resolve row with IMF over BI law

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)