he government decided on Monday not to renew the existing

he government decided on Monday not to renew the existing
International Monetary Fund (IMF) economic bailout program when
it expires at the end of this year, but the IMF is still to
monitor the country's economic reform program via a post-program
monitoring (PPM) arrangement.

Coordinating Minister for the Economy Dorodjatun Kuntjoro-
Jakti told an afternoon press conference the decision was made at
a Cabinet meeting led by President Megawati Soekarnoputri, who
would outline the government post-IMF economic policy program in
mid-August.

The decision comes as no surprise to many financial analysts.

The People's Consultative Assembly (MPR) has urged the
government not to extend the current IMF program; but determining
an exit strategy has proven to be difficult and has involved
lengthy, emotional public debates due to opposing views, even
within the Cabinet.

While many of Megawati's economics advisors apparently wanted
to keep the IMF's monitoring role to ensure credibility in the
economic reform program, a strong opposition camp led by Chairman
of the National Development Planning Agency (Bappenas) Kwik Kian
Gie and former chief economic minister Rizal Ramli has insisted
that even without the IMF's monitoring, the government could
design a credible economic program.

The opposition camp, which claims that the IMF program had
failed to cure the country's economic illness, said the country's
relatively strong foreign exchange (Forex) reserve of US$34
billion should be more than enough to repay at once all debts to
the IMF, which is estimated to reach around $10 billion by the
end of this year.

Dorodjatun said the government had decided on a debt payment
based on the original schedule, spread over a seven-year period
starting this year. Proponents of this strategy argue that it is
better for the country to install the repayment and maintain a
relatively high Forex reserve in case it has to deal with
another, unexpected economic turbulence.

As a consequence, until the country can bring down its IMF-
debt to below the member quota level of $2.8 billion, it must
adopt a PPM arrangement -- a move also made by other crisis-hit
Asian countries when they first ended their IMF programs.

Dorodjatun said, however, that depending on the country's
progress, the elected government in 2004 could accelerate the
repayment of the IMF loan.

Under the PPM arrangement, the IMF would review the country's
economic progress twice a year, while the government must spell
out its economic targets and reform programs in a matrix of
executed efforts.

The monitoring by the IMF and the disclosure of a detailed
economic program are expected to give rise to investor
confidence, which will be crucial to the government, as Indonesia
will no longer be eligible for the Paris Club's debt rescheduling
facility as a consequence of ending the IMF program.

The government has said it would issue bonds, both at home and
overseas, sell assets and seek foreign loans to finance next
year's fiscal gap.