Govt sends new LoI to IMF

Govt sends new LoI to IMF

The Jakarta Post, Jakarta

The government has sent a new Letter of Intent (LoI) to the
International Monetary Fund, paving the way for the disbursement
of the Fund's next loan tranche to the country.

The LoI, which contains a set of economic targets and reform
programs designed together with IMF officials during their recent
visit, will have to be approved first by the IMF board of
directors in Washington before the loan is disbursed.

Indonesia has so far received around US$4 billion out of a $5
billion IMF loan package. The remaining $1 billion will be
disbursed in two tranches before the current IMF loan program
expires later this year.

The IMF board of directors is expected to convene in the first
week of next month.

According to Mahendra Siregar, a deputy at the Office of the
Coordinating Minister for the Economy, the economic programs set
out under the new LoI included plans to sell a number of state-
owned companies, such as Bank Rakyat Indonesia, which will be
sold via an initial public offering next month.

Other programs include steps to improve corporate governance
in state-owned enterprises, curbing corruption and the tightening
of central bank regulation.

The government sends a letter of intent to the IMF every
quarter in order to secure the disbursement of the next loan
tranche.

But after the current program expires, the government will no
longer be eligible for IMF loans. As a consequence, the country
will also no longer be able to obtain debt rescheduling
facilities from the Paris Club of creditor nations, thus creating
greater pressure on the state budget.

After this LoI, the government will not be required to submit
any further LoIs to the IMF. In order to fill in the gap, the
government has issued its own version of an LoI, referred to as a
White Paper, which basically sets out a list of post-IMF economic
reform programs to be carried out over the next 18 months.