IMF approves final loan tranche to Indonesia

IMF approves final loan tranche to Indonesia

Agencies Jakarta

The International Monetary Fund (IMF) on Friday approved a new US$505 million loan to Indonesia, the final portion of the $5.3 billion support program that the government called in after the 1997-98 Asian financial crisis.

Indonesia has already decided not to ask the international lender for a new support program. Nonetheless, the country will enter into the IMF's "post-program-monitoring" scheme, under which the IMF will continue to check Indonesia's economic conditions and advise policy if necessary.

Upon approval of the last portion of the loan, the IMF board applauded Indonesia's efforts of the past few years to put its economy on a sustained recovery track.

"An impressive fiscal consolidation and disinflation effort, together with reduced external vulnerability, have laid the basis for a sustained improvement in growth and employment prospects in the period ahead," IMF Deputy Managing Director Shigemitsu Sugisaki said in a statement quoted by Dow Jones news wire.

The IMF also expressed optimism about the nation's efforts to continue economic reform.

"Satisfactory progress continues to be made with key structural reforms. The divestment of government ownership in banks is proceeding well ... . It will be important to sustain these reform efforts and, in particular to follow up decisively on the recent steps," Sugisaki said.

Daniel Citrin, the IMF's Indonesia mission chief, was reported by Agence France-Presse as saying the country's economy has stabilized since the regional crisis.

"The fact that they are not seeking a new arrangement for 2004 is testimony to the success of the government' efforts to restore macroeconomic stability," he told reporters.

The Indonesian economy, he said, "has tremendous potential; it is a rich country with rich resources, and an educated labor force. What's needed is a much more stable and regulatory policy environment."

Since the Asian crisis, the IMF's lending to Indonesia has totaled $13 billion, of which the government has paid back about $3 billion.

Indonesia's retirement from the program also means the end of nearly automatic debt rescheduling from the so-called Paris Club of government creditors. The country has already announced its post-IMF reform strategy, in a "White Paper," in the hope of keeping the confidence of these and other private international lenders. According to the World Bank, Indonesia needs to raise about $10 billion in 2004 to refinance its debts.

"The (Indonesian) government's economic package for 2004, as set out in its 'White Paper,' provides a sound framework for meeting the challenge of keeping investor confidence," Sugisaki added.