Govt needs to extend IMF program: Official

Govt needs to extend IMF program: Official

Berni K. Moestafa, The Jakarta Post, Jakarta

The government should extend its agreement to an economic
reform program under the supervision of the International
Monetary Fund (IMF) in order to maintain badly needed
international financial support, according to a senior official.

Deputy minister for international cooperation at the office of
the Coordinating Minister for the Economy, Syafruddin A.
Temenggung said on Wednesday the IMF's presence was vital in
securing foreign loans that would help finance the deficit in the
state budget.

He pointed out as an example that the Paris Club of creditor
nations would require Indonesia to have a working program with
the IMF to obtain a debt rescheduling facility.

"What we need is fiscal sustainability; for that we need the
support of the CGI (Consultative Group on Indonesia) and the
Paris Club," he told reporters.

The CGI groups the country's major lenders, which recently
pledged some US$3.14 billion in loans to help finance next year's
state budget.

Earlier on Tuesday, Minister of Finance Boediono told a
seminar that the government was studying the possibility of
extending the current IMF program, which would expire at the end
of next year, in line with the plan to seek a rescheduling
facility from the Paris Club.

The government has planned to reschedule some $6 billion in
sovereign debt maturing between 2002 and 2004. A meeting with the
Paris Club is scheduled in February next year to seek the
rescheduling of at least Rp 27 trillion ($2.6 billion) in debt
(both principal and interest) to help ease the burden of the 2002
state budget.

The first IMF loan program was signed in November 1997 after
the country had been hit by the regional financial crisis. The
current $5 billion loan agreement was signed late in 1999 to
finance a three-year economic reform program. But, so far, the
country has only received around $1.2 billion of the $5 billion
package.

"We need the IMF as some sort of umbrella at the Paris Club
meeting," Boediono was quoted as saying by local media.

He said it was likely the government would extend its
cooperation with the fund to at least the year 2003.

The government could expect another $3.8 billion over the next
two years, if it extended the deal to 2003.

Separately, Coordinating Minister for the Economy Dorodjatun
Kuntjoro-Jakti said on Wednesday that the government was still
weighing the pro and cons of extending the IMF deal.

He said certain exercises were being carried out to come to a
decision.

"Whether we'll have to fight for it (the deal extension) or
not remains to be seen. At the same time we continue our work on
the current LoI and the new one," he said, referring to the
document known as the letter of intent.

The LoI contains a set of reform targets by which the IMF
measures Indonesia's progress with economic reform.

For this year, the government has signed three LoIs, each
accompanied by a $400 million loan tranche.

Disbursement of the loans is dependent on the government's
compliance with the LoI reform targets.

An IMF team arrived in Jakarta last week to review the current
LoI and start discussing the next one.

The team leader, IMF senior advisor for the Asia Pacific
department Daniel Citrin, said he had not heard if the government
was asking the fund for an extension to the program.

Separately, economist and former coordinating minister for the
economy Rizal Ramli criticized plans to extend Indonesia's
cooperation with the fund.

Speaking to local media, he accused the IMF of giving the
country the wrong recipe to cope with its economic crisis.