Tue, 07 Nov 2000

Govt, IMF agree to slow down BRI loan divestment

JAKARTA (JP): The government and the International Monetary Fund (IMF) have reached an agreement not to force state-owned Bank Rakyat Indonesia (BRI) to divest all its corporate loans by the end of this year as originally scheduled, a senior government official said on Monday.

Dipo Alam, assistant to the coordinating minister for the economy, said the corporate loan transfer would be made gradually.

"We can't force BRI to divest its corporate loans to zero percent by the end of this year," he said following a technical review meeting with the IMF.

Dipo said a "compromise solution" had been reached, but he declined to disclose the new target for the corporate loan transfer.

He said the solution would consider the bank's abilities according to its business plan.

In the last letter of intent to the IMF, the government agreed to divest all of BRI's corporate loans, currently at 20 percent or equal to Rp 6.2 trillion, by the end of this year to allow the bank to focus on financing the agriculture sector and small and medium-scale businesses.

But the new policy was opposed by the bank. Minister of Finance Prijadi Praptosuhardjo also said it was impossible for BRI to meet the corporate loan transfer target as set by the IMF.

According to BRI's business plan, the bank will divest its corporate loans from 20 percent this year to 18 percent by the end of next year, and 17 percent in 2002. It is not clear when the bank will finish selling its corporate loans.

Analysts have said forcing the bank to transfer all of its corporate loans would badly hurt its financial performance because BRI had obtained lucrative profit from the business.

A group of government senior officials have been engaged in a technical meeting with the IMF officials since last week to review the country's economic reform program set out in the letter of intent. The technical meeting is scheduled to end on Tuesday.

The meeting will be followed by a review meeting involving senior economic ministers, which will set up a new letter of intent.

The IMF is expected to disburse another tranche of its loan to the country next month after approving the country's new letter.

The IMF is providing the current administration with some US$5 billion in bailout funds to help finance the country's three-year economic program. So far, the fund has disbursed about $1 billion.

The government had made delays in the past in implementing its key economic program agreed with the IMF, forcing the latter to postpone its loan disbursement. The delay in the IMF loan disbursement has hurt confidence in the country.

Dipo said the new letter of intent would only disclose a "schedule and figures" to be achieved by the government.

He said the letter would no longer contain details of the country's economic programs. (rei)