IMF approves $347m loan tranche for RI

IMF approves $347m loan tranche for RI

Anna Willard, Reuters, Washington, D.C.

The International Monetary Fund said on Friday it had approved a US$347 million loan tranche for Indonesia, but waived several of the conditions under the $4.6 billion loan program to give the country more time to carry out the relevant reforms.

The fund urged the country, with which it has had a rocky relationship throughout the course of the loan which was agreed in February 2000, to push ahead with reforms and warned that there is no room for complacency.

"In their early implementation of the program adopted for 2002, the Indonesian authorities have signaled determination to consolidate the progress made so far and build a solid foundation for future economic recovery," IMF First Deputy Managing Director Anne Krueger said in a statement.

"The program deserves the continued strong support of the international community."

Indonesia and the IMF have ironed out major differences since the loan package lapsed for around eight months last year over a slew of failed reforms.

Krueger said meeting the 2002 budget targets, which aim for fiscal consolidation and lower inflation, will be a key step to ensuring the economy is sustainable over the medium term. However, this would need to be accompanied by a push to strengthen fiscal decentralization.

Financial sector reforms will also be a key component for the success of the economy, the IMF official said, welcoming the sale of Bank Central Asia and urging the government to build on this with the planned sale of Bank Niaga. The Indonesian Bank Restructuring Agency (IBRA) has drawn up a short-list of investors for the second bank.

She encouraged IBRA to speed up loan disposal and to take more decisive action with regard to noncooperative bank owners. Further progress is also need in the areas of corporate debt restructuring and on legal judicial reforms, she said.