Government welcomes new IMF disbursement

Government welcomes new IMF disbursement

JAKARTA (JP): The government welcomed yesterday the
International Monetary Fund (IMF) executive board's decision on
Tuesday to disburse another US$1 billion in rescue funds and
praised the new aid as another boost to strengthening the rupiah.

Coordinating Minister for Economy, Finance and Industry
Ginandjar Kartasasmita said yesterday the IMF aid, combined with
returning confidence in the economy following the government's
firm action against ailing banks last week, had contributed
greatly to the strengthening of the rupiah against the dollar
over the last three days.

The rupiah rose to about 11,100 early this week, its highest
level since May when the currency fell to as low as 17,000.

"More encouraging is that the rupiah has been strengthening
without any government market intervention," Ginandjar added.

The government has projected the rupiah will average 10,600 to
the dollar during the current fiscal year which ends in March.

"Hopefully, the rupiah will gradually appreciate to 10,000
later this year. But we prefer a gradual strengthening to a
sharp, but volatile rise, because sharp fluctuations may spark
speculation," Ginandjar told reporters.

The IMF executive board approved Tuesday the next one-billion-
dollar loan tranche to Indonesia as part of a $46 billion bailout
package, and praised the nation's efforts to combat its economic
crisis.

IMF Managing Director Michel Camdessus added in a statement
late Tuesday in Washington that the IMF board approved better
lending terms through an extended fund facility (EFF) for
Indonesia totaling some $6.2 billion.

Camdessus was quoted by Dow Jones Newswires as saying that
the EFF's "longer repayment period ... will allow time for the
Indonesian reform program to take full effect, and will further
strengthen the outlook for the balance of payments."

The EFF replaces a three-year standby credit approved last
year, of which $4.9 billion has already been disbursed.

The move is "in response to the broadening of Indonesia's
economic strategy in recent months ... to include a wide-ranging
program of structural reforms," the IMF said.

The programs include the restructuring of the banking and
corporate sectors, as well as the deregulation of monopolies, the
privatization of state-owned companies and trade liberalization.

Camdessus said that the next disbursements of the loan to
Indonesia were scheduled for Sept. 25, Oct. 25 and Nov. 25.

He added that the amount of credit available under the
extended fund facility and its duration were identical to the
stand-by credit they replace. However, the repayment period for
financing under the extended fund facility was substantially
longer, he stated.

The repayment period of the extended fund facility is between
4.5 years and 10 years, while the repayment period for standy-by
credits is between 3.25 years and five years.

This will further strengthen the outlook for the balance of
payments, which is already benefiting from substantial bilateral
and multilateral external financing programs for the
restructuring of the banking system and corporate debt to private
creditors, he added.

On July 15, the IMF announced new aid commitments boosting the
economic rescue package aimed at helping Indonesia revive its
crippled economy, with aid from the Fund and other donors rising
to at least $46 billion.

The IMF bailout program, initiated last year when Indonesia
was struck hard by the regional economic crisis, was stalled
first over the country's perceived unwillingness to follow
reforms, and then by the rapid deterioration of the economy.
(prb/vin)