IMF approves $493m loan disbursement for Indonesia
The Jakarta Post, Jakarta
The International Monetary Fund (IMF) has approved its latest loan tranche to Indonesia worth US$493 million, the penultimate disbursement to be made under the ongoing borrowing program due to end later this year.
The new loan tranche has brought the total loans taken up by Indonesia to $4.7 billion, under a $5.2 billion extended fund facility arrangement, the IMF said in a statement released on Wednesday in Washington.
The disbursement followed the IMF approval of the country's reform programs outlined under the tenth review of the economic program, such as selling a number of state-owned companies -- including Bank Rakyat Indonesia.
IMF First deputy managing director and acting chairperson Anne Krueger highlighted progress that the country had made in its economic reform drive.
"Indonesia's economic performance has continued to evolve favorably under the Fund-supported program, with a sustained economic recovery, a continued easing of inflation, and a further increase in external reserves," she said in the statement.
"These favorable developments have further reduced the economy's vulnerability to external shocks."
Authorities were to be commended for the continued downward trend in inflation which -- together with the stable rupiah -- had enabled Bank Indonesia's benchmark interest rates to be cut further in support of the economic recovery, she added.
Indonesia asked for the IMF's loan program in 1999, after being severely hit by the 1997-1998 economic crisis. In return, the country has to meet a set of quarterly economic reform targets which the IMF must approve of.
Only recently, the government decided not to extend the IMF's contract, and in return outlined its economic reform program under the so-called White Paper.
The IMF board welcomed such post-IMF program plans.
"The government's detailed 'White Paper' laying out the economic strategy will play an important role to maintain investor confidence after Indonesia's graduation from the current IMF program," Krueger said.
Despite the positive notes, the IMF called for further efforts to maximize the country's economic potential.
"They need to redouble efforts to strengthen governance and sustain the momentum of legal and judicial system reforms, for example, through the early establishment of the Anti-Corruption Commission," Krueger said.
IMF's tenth review of RI economic program
1. On macroeconomic performance: Inflation has declined markedly and the government now expects it will be in the range of 5 percent to 6 percent by year end. The 2003 budget is on track and this will support the steady reduction in public debt ratio.
2. On financial sector reforms: Development in preparing a financial safety net -- including the establishment of a deposit insurance facility -- will permit, over time, an unwinding of the blanket guarantee of bank liabilities, while ensuring the systemic safety of the financial system.
3. On public finance reforms: The ongoing reforms of the tax and customs administration are to be broadened. The Finance Ministry is to be reorganized to provide effective and treasury and budget functions.