IMF approves loan installment for Indonesia

IMF approves loan installment for Indonesia

WASHINGTON (Dow Jones): The International Monetary Fund
Tuesday approved a US$460 million loan installment for Indonesia.

In a further vote of confidence in Indonesia's economy, the
IMF said in a statement that its directors approved the sixth
review of the IMF's Extended Fund Facility arrangement with
Jakarta and have given their approval to disburse the next
installment.

Stanley Fischer, the IMF's first deputy managing director,
said in a statement later Tuesday the latest review of the
Indonesian economy found "signals of an incipient recovery in
real output."

Fischer said the IMF's board also welcomed a recent
improvement in market confidence toward Indonesia, the successful
conclusion of recent national elections and the continuing
implementation of the economic reform program.

He said the success of this program so far is evident in the
recent recovery of the Indonesian rupiah and a climb in local
equity prices.

"The agreed monetary policy stance should permit a further
gradual and market-led decline in interest rates given the
sizable output gap and the absence of inflation," Fischer said.

"Exchange rate policy should continue to be implemented
flexibly so as to accommodate market pressures. In the near term,
fiscal policy should deliver the planned stimulus necessary to
promote recovery," he said.

In particular, the government should aim to boost spending on
social programs to aid Indonesia's poorest, Fischer said.

"Directors emphasized that the restoration of strong and
sustainable growth requires an acceleration of structural
reforms, especially in bank and corporate restructuring," he
said.

Fischer urged the Indonesian government of President B.J.
Habibie to spur the recapitalization and restructuring of state
banks, to accelerate the privatization of banks taken over by the
Indonesian Bank Restructuring Agency and to improve bank
supervision.

Turning to Indonesia's private sector, Fischer said that with
a new framework in place to work out corporate debts, there
remains the challenge to ensure that creditors and debtors
actually seize this opportunity to negotiate new debt
settlements.

He also stressed the need for Indonesia to press ahead with
new bankruptcy procedures to ensure that companies hemorrhaging
losses are forced to close instead of soaking up more debt.

"Directors recognized that the economic recovery is still at
an early stage, and emphasized the need for continued careful
implementation of agreed macroeconomic and structural policies to
ensure that recent achievements are preserved and enhanced as the
political environment changes," Fischer concluded.