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.