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)