House to summon IMF over bank program

House to summon IMF over bank program

JAKARTA (JP): The House of Representatives plans to summon
International Monetary Fund officials for information about the
controversial multibillion dollar government bailout liquidity
support provided between late 1997 and 1998 to help ailing banks
stay afloat.

Head of the House special investigation team Sukowalujo
Mintohardjo said on Friday the House had yet to decide on a
schedule.

"The role of the IMF in the restructuring of banks in
Indonesia is huge, particularly in relation to the liquidity
support policy. We'll confirm this with them," Sukowalujo said
following a closed-door questioning of former finance minister
Fuad Bawazier and former coordinating minister for economy,
finance and industry Ginandjar Kartasasmita.

He added that legislators would also question the IMF over the
government's overall bank restructuring and economic program.

Indonesia turned to the IMF for help in 1997 after the country
was hit by an economic crisis which started in the middle of the
year.

The government via the central bank has since injected a total
of Rp 164.5 trillion (US$23 billion) in liquidity supports to
help domestic banks cope with massive bank runs, particularly
following the closure of 16 private banks in November 1997.

Bank liquidation was a medicine prescribed by the IMF to help
cure the country's economic illnesses. Both the government and
the IMF have quietly admitted that closing down the 16 banks was
a blunder that led to the plunge of public confidence in the
industry.

In early 1988 the government launched the blanket guarantee
program, which guarantees all obligations of closed down banks.
The program is a part of and a modification of the liquidity
support program.

The controversy surrounding the liquidity support program
centers on an allegation that some Rp 80 trillion of the facility
was channeled through an improper procedure.

The allegation, which is based on a leaked general audit
report by the Supreme Audit Agency (BPK), has cornered Bank
Indonesia.

Former finance minister Fuad Bawazier was quoted by Sukowalujo
as admitting that there was indication of abuse in the liquidity
support program.

Fuad said more of the facility had been injected than what the
banks had actually needed.

There has also been increasing pressure for Bank Indonesia
Governor Sjahril Sabirin to resign.

But Sjahril, who assumed his position in February 1998, has
denied the allegations and has insisted that he will not step
down.

Based on the new central bank law, enacted in May 1999, the
board of governors of Bank Indonesia can only be forced to step
down by the House if a crime has been committed.

BPK is currently conducting its investigative audit, which is
expected to be completed by May this year.

The House is also conducting its own investigation. Its
investigation team has so far summoned the former owners of
recipient banks, three former finance ministers, former central
bank governor and other high ranking state officials.

Earlier attempts by the investigation team to question former
president Soeharto failed due to the his poor health.

The largest chunk of the liquidity support facility was
reportedly channeled to banks owned by the family and friends of
Soeharto.

Meanwhile, banking legal expert Pradjoto said problems
concerning the liquidity support policy could not be solved if
people continued to focus on debating the policy because the core
of the problem was the abuse of the funds at recipient banks.

"There seem to be no efforts at all to prosecute the owners
and management of the banks, while the House investigation team
continues to focus on why the policy was launched," he told a
discussion gathering.

Pradjoto also criticized the slowness of the Attorney
General's Office and the police in resolving the case.

He suggested the Attorney General's Office form a special team
which included banking experts to deal with the case.

He expected a resolution to the case could be accelerated
once BPK and the Development Finance Comptroller (BPKP) had
completed their separate audits on Bank Indonesia and commercial
banks which received liquidity credits. (rei)