Govt to complete key talks with IMF today

Govt to complete key talks with IMF today

Dadan Wijaksana and Berni K. Moestafa, The Jakarta Post, Jakarta

After weeks of intense discussion, the government and the
visiting International Monetary Fund (IMF) mission team are
expected to complete the assessment of the country's economic
condition and reform programs on Tuesday.

"(The discussion) has been going well, but it's not finalized
just yet. We'll still have a chance to meet tomorrow, we'll wrap
it up all by then," Finance Minister Boediono told reporters late
on Monday following a meeting between key economic ministers and
the IMF team.

He declined to provide further details.

A special mission of the IMF, led by the Fund's senior adviser
for the Asia Pacific department Daniel Citrin, has been in
Jakarta for two weeks not only to review the country's latest
economic condition, but also together with the government to
draft Indonesia's fourth letter of intent (LoI).

The LoI, in this case, is a set of economic targets and reform
programs which must be achieved and implemented by the government
within a certain period of time to qualify for further loans
under the IMF's structural adjustment program.

The draft of the LoI will be brought to the IMF board of
directors in Washington for approval, which will pave the way for
the disbursement of the Fund's next US$400 million loan tranche.

The government expects the IMF to make the next loan
disbursement later this year. The disbursement of the IMF money
is crucial to help revive investor confidence in the ailing
economy.

Indonesia has so far received around $1.2 billion out of the
$5 billion loan program agreed upon in late 1999.

Meanwhile, State Minister of State Enterprises Laksamana
Sukardi also confirmed the smooth process of the discussions,
saying that so far there had been nothing that could lead to any
disagreement.

Among the economic targets set for the fourth LoI, according
to sources, were an economic growth target of 3-4 percent for
2002, inflation of 9-10 percent and Rp 42.5 trillion ($4 billion)
proceeds from the sale of assets under the Indonesian Bank
Restructuring Agency (IBRA).

Earlier, a Bank Indonesia (BI) senior official said that one
important item to be included in the LoI was a plan to launch a
new investigation into alleged misuse of some Rp 138.4 trillion
in BI emergency loans.

The case centers around the central bank's liquidity support
to 48 local banks during the peak of the 1997 financial crisis.

Although two separate investigations have been conducted in
the case, they yielded neither prosecutions nor the repayment of
the loans.

Meanwhile, regional banking analyst Lin Che Wei at SG
Securities warned the move might stir legal uncertainties for
debtors under IBRA.

"The implications of this (probe) can spread everywhere," he
told The Jakarta Post.

Any follow-up on the probe will inevitably lead to reviewing
IBRA's Master of Settlement and Acquisition Agreements (MSAA) - a
deal requiring bank owners to surrender assets to IBRA as
collateral for their debts to the government.

He said forcing debtors to transfer more assets despite the
MSAA, would hurt debtors' rights guaranteed in that document.

Che Wei said the government should realize that the loan abuse
case may not get resolved within a short time. It must also know
the consequences if this were to become an item on the next LoI.