IMF agrees to disburse another $365 million to RI
Dadan Wijaksana, The Jakarta Post, Jakarta
The International Monetary Fund (IMF) has agreed to disburse its latest loan tranche to Indonesia, in what the government claims as a vote of confidence in the country's economy despite the adverse impacts of the Oct. 12 Bali bombings.
The approval of the loan, amounting to around US$365 million, was reached following a meeting of the IMF's board of directors to review the country's seventh letter of intent (LoI) to the Fund, which was submitted to Washington on Nov. 20, a press release said.
The seventh LoI refers to the government's quarterly report to the IMF over progress made in meeting a set of promised economic reform targets.
With the disbursement of the fresh loan, the IMF has channeled a total of about $3 billion, out of a total loan package worth $5 billion agreed to between the government and the IMF in early 2000.
Coordinating Minister for the Economy Dorodjatun Kuntjoro- Jakti hailed the IMF decision as a reflection of the Fund's confidence in the progress of the country in carrying out its economic reform program.
"Indonesia's macro-economic improvement which is based on fiscal consolidation and monetary stability has produced economic growth, a more controlled inflation and improvement in the state of the balance of payment," he said in the press release.
The progress, he added, was made even after the economy was hurt by the devastating terrorist bomb attack on Bali, which had worsened the country's investment climate on which several LoI targets relied on.
The LoI outlines the country's economic reform program and contains time bound targets which the government must meet in return for a quarterly disbursement of the IMF loan.
On Fiscal and monetary policy, as stated in the last LoI, all June to September quantitative performance criteria and indicative targets were met, with fiscal policy being on track with a deficit target of 2.5 percent of gross domestic product (GDP).
Progress has also been made on the divestment program, under which the government has completed the sale of shares in Bank Niaga.
The legal merger of five banks under IBRA was completed in October with an operational merger to follow suit this month.
However, there are also a number of unfinished reform targets, which should have been completed by September.
One of those is the delayed burden sharing deal between the finance ministry and Bank Indonesia over some Rp 138.4 trillion (about $15 billion) in liquidity support loans channeled to troubled banks during the late 1990s financial crisis.
Another is the delayed creation of an anti-corruption commission, which should have been set up by June.
Elsewhere, Dorodjatun said that the immediate challenges for the country now was to take advantage of the above positive momentum to boost investment and revive the real sector to help create more employment to jobless Indonesians.