Govt, IMF to discuss debt restructuring extension

Berni K. Moestafa, The Jakarta Post, Jakarta

The government and the International Monetary Fund (IMF) are preparing to discuss the extension of a debt restructuring program for former bank owners under the Indonesian Bank Restructuring Agency (IBRA), a senior government official said on Wednesday.

An advisor to Finance Minister Anggito Abimanyu said the 10- year extension of IBRA's shareholders' settlement program would be discussed in the upcoming review of the fifth Letter of Intent (LoI) with the IMF.

The current LoI allowed the government review the shareholders settlement program, Anggito was quoted as saying by the news web site, detik.com.

Under the original program, the former owners of the banks, which are now under IBRA, have only four years time in which to settle their debts.

As of yet, most have not even begun to repay the debts or surrender their assets to the IBRA.

The debtors cited the prolonged economic slump as being behind the difficulties in raising enough cash within the four year period.

The IBRA, with the backing of senior economic ministers under the Financial Sector Policy Committee (FSPC), then decided last month to extend the deadline by up to 10 years.

The decision drew criticism from bank analysts who charged the IBRA of being soft on uncooperative debtors.

But IBRA officials said that, without an extension, the uncooperative debtors would continue deferring their debt payments.

Thus far, the FSPC has turned down suggestions to revert to its original shareholder settlement program.

Anggito said the government and the IMF had agreed to take decisive action against what they called noncooperative debtors.

That, he said, included reviewing the original shareholder settlement program.

Bringing the program's extension into discussion with the IMF implied the decision was subject to the Fund's approval.

The fourth LoI did say that the government should take decisive action against uncooperative debtors but rather within the context of taking legal actions.

The IBRA has filed legal actions against 49 noncooperating debtors of the top 21 obligatory with a total debt of Rp 13 trillion (about US$1.23 billion), a copy of the fourth LoI said.

"In the future, the IBRA envisages more regular use of its PP17 powers, as to accelerate asset recoveries," it said.

PP17, or government regulation no. 17, enables the IBRA to expedite legal proceedings by ignoring some of the normally required procedures.

Anggito said the government and the IMF would begin talks over the targeted reforms which will be prepared for the fifth LoI next month. The IMF, meanwhile, will have the final say over the LoI reforms program.