Govt optimistic about IMF loan as negotiations start

Govt optimistic about IMF loan as negotiations start

JAKARTA (JP): The government expressed optimism on Thursday
that the International Monetary Fund (IMF) would disburse its
stalled loan tranche to the country, as the two sides began
economic talks late in the day.

Coordinating Minister for the Economy Burhanuddin Abdullah
also repeated his optimism that the 9-day negotiations with the
IMF would run well.

"From the impression in (today's) meeting, I think it will run
smoothly," Burhanuddin said, as he emerged from a meeting between
senior economic ministers and the IMF special mission.

When asked if the current talks would finally lead to the
disbursement of the IMF money, he said "I am optimistic."

The IMF special mission arrived in Jakarta at noon on
Thursday, led by deputy director for Asia Pacific Anoop Singh.

The government and the IMF team will discuss various economic
issues, and the two are expected to draw up a new letter of
intent (LoI) that will essentially contain certain economic
reform programs and economic targets that must be implemented and
achieved by the government.

The new LoI will then be presented to the IMF executive board
in Washington for approval, a necessary condition for
disbursement of the Fund's money.

The IMF is providing the country with a US$5 billion bailout
loan, but it canceled the disbursement of the latest $400 million
loan tranche late last year, amid signs that the government was
wavering in the implementation of an agreed reform program.

The delay in the IMF loan further eroded the confidence of
investors and the country's major lenders.

In a bid to mend relations with the IMF, President Abdurrahman
Wahid appointed Burhanuddin as the chief economics minister last
month.

Meanwhile, Singh declined to comment on whether the plan by
the People's Consultative Assembly (MPR), the country's top
legislature, to impeach Abdurrahman would affect the IMF program.

"We don't get into these things," Singh was quoted by Reuters
as saying.

The MPR is planning to hold a special session on August 1,
with a possibility of impeaching Abdurrahman over alleged
financial scandals and the poor performance of his
administration.

There has been speculation that the IMF would not disburse its
money unless there were a strong and credible government in
place.

Elsewhere, Burhanuddin said that the 9-day discussion would
first focus on macroeconomic issues, particularly inflation.

"We'll talk first about inflation ... We must address this
problem," Burhanuddin said.

"We will also focus on how to rebuild market confidence via
various macroeconomic stability programs," he said.

He added that the government and the IMF would also focus on
how to achieve fiscal sustainability this year and next.

"This is very important for macroeconomic stability," he said.

The government recently introduced certain measures, including
raising fuel prices and electricity rates in a bid to limit the
2001 state budget deficit to 3.7 percent of gross domestic
product (GDP). The IMF had earlier warned that the deficit could
widen to 6 percent of GDP, unless measures were taken.

Burhanuddin said that the IMF team would also meet with the
Indonesian Bank Restructuring Agency and the Jakarta Initiative
Task Force over ways to accelerate bank and corporate
restructuring. (rei)