Govt, IMF yet to reach final accord
JAKARTA (JP): The government and the International Monetary Fund have completed the review of Indonesia's reform measures but have yet to agree on a new letter of intent (LoI), Coordinating Minister for the Economy, Finance and Industry Kwik Kian Gie said on Wednesday.
Kwik said at a media conference the new LoI, originally scheduled to be signed on Wednesday, had yet to be examined and approved by the IMF executive board in Washington.
"I hope the new LoI will be approved by the fund's executive board before June 5," Kwik said.
Kwik said the IMF was expected to disburse a loan to Indonesia after the fund's board approved the new LoI.
"I'm happy because everything can be completed ... There is no overhanging problem," he said.
He declined to provide details of the new LoI, simply saying the letter of intent contained the same economic measures listed in the LoI signed with the fund in January, plus a new set of deadlines and additional programs.
The newly elected administration of President Abdurrahman Wahid signed on Jan. 20 a three-year set of economic reform programs with the IMF. Under the agreement, the fund will provide some US$5 billion in loans to help finance the programs.
The IMF was expected to make a second loan disbursement of some $400 million in early April, but delayed the disbursement because the government failed to meet the March 31 deadline to implement a host of key economic measures.
Kwik said the June 5 deadline for approving the new LoI was a condition set by the Paris Club of sovereign creditor nations, which last month agreed to reschedule $5.8 billion of Indonesia's sovereign debts.
Kwik did not clearly explain why the government did not immediately sign the new LoI, which was its past practice when a review was completed with the visiting IMF team.
"We can't sign the LoI today, but later after it is approved by the managing director and executive board of the IMF in Washington," Kwik said.
With previous letters of intent, the coordinating minister for the economy, finance and industry signed the LoI as the government's representative.
With the new LoI, however, Bank Indonesia Governor Sjahril Sabirin must also sign the letter of intent because the central bank is now independent of the government. A number of the reform measures contained in the new LoI are aimed at Bank Indonesia.
The head of the IMF review team, Anoop Singh, said the new LoI would be taken to Washington for approval by the fund's managing director and later by its executive board.
"There may be changes between now and then. So at this stage, the LoI is not final," said Singh, who is also the IMF deputy director for Asia Pacific.
Singh expressed satisfaction with the talks with the government and was confident of Indonesia's commitment to press ahead with its economic reforms.
"We have been very encouraged by the full commitment of the economic team, including the President," he said. "There's no doubt that they're completely committed to implementing the program."
He said several measures had been taken by the government over the past month, and another set of actions to be taken over the next two months to carry out the programs which had been laid out.
Kwik said that as part of the three-year contract the IMF signed with the government in January, a review of the country's economic reform programs would be held every two months.
Meanwhile, Minister of Trade and Industry Luhut Pandjaitan said the IMF rejected the government's plan to halt the import of raw sugar to protect the nine million local sugarcane farmers.
Speaking to journalists after finalizing the new LoI, Luhut said the IMF argued the measure would be against the principles of free trade, which is championed by the fund.
Luhut said on Tuesday the government was planning to halt the import of raw sugar.
But Luhut added the IMF had no objections if the government wished to revise the current 20 percent import duty on raw sugar.
"We'll study a new equation that will protect the interests of consumers, producers as well as industry," he said.
The government initially allowed the import of raw sugar to meet increasing demand from the food and beverage industry, but the imported sugar later reached household consumers.
Luhut said the government had no plans to revise the current 25 percent import tariff on white sugar.(rei)