IMF assures CGI of Indonesian progress

IMF assures CGI of Indonesian progress

JAKARTA (JP): The International Monetary Fund (IMF) assured on
Friday Indonesia's major donors grouped under the Consultative
Group on Indonesia (CGI) of the country's progress in meeting
economic reform targets.

State Minister for National Development Planning (Bappenas),
Kwik Kian Gie said the IMF had told the CGI during a meeting that
"everything was fine and clear."

"The IMF's confirmation is important in such meetings; this
time coming directly from Anoop Singh himself," Kwik said,
referring to the IMF's Asia Pacific deputy director who is
currently leading the IMF team in Jakarta to draw up a new
lending agreement with the government.

Friday's meeting between the IMF and local representatives of
CGI donor countries was hosted by the World Bank.

Next to Kwik, representing the government were Coordinating
Minister for the Economy Dorodjatun Kuntjoro-Jakti and Bank
Indonesia Governor Sjahril Sabirin.

"Pak Dorodjatun gave an overview of Indonesia's economic
condition and the positive response we have received up until now
from here and abroad," Kwik said.

The CGI groups together Indonesia's major international
lenders, which last year pledged around US$4.8 billion in loans
to help plug this year's state budget deficit.

Its biggest donors are the World Bank, the Asian Development
Bank (ADB), and Japan.

The World Bank and ADB have said their full support to
Indonesia depended on the country meeting reform commitments it
made with the IMF.

The banks have said that one of the preconditions for a "high-
case scenario" was an agreement with the IMF over the economic
reform program.

Meanwhile, Japan has slashed its Overseas Development
Assistance (ODA) budget, citing a sluggish economy.

Kwik said the IMF's positive comments on Indonesia would help
pave the way for a successful meeting of the CGI sometime in
November.

He said Indonesia's stance for the upcoming CGI meeting
depended on how the 2002 state budget would look like.

Dorodjatun said earlier Indonesia was likely to ask the CGI
for more loans to help finance the 2002 state budget.

Concerns remain high that next year's budget would face
another gaping deficit, which could exceed this year's projected
3.7 percent Gross Domestic Product (GDP).

Aside from foreign loans, the government plans to plug the
budget deficit with proceeds from asset sales by the Indonesian
Bank Restructuring Agency (IBRA) and privatization of state-owned
enterprises.

CGI's loans are mainly used to support social programs such as
poverty alleviation and good corporate governance.

While the group reviews future loans based on Indonesia's
ability to work with the IMF, it also demands the country fulfill
the pledges it made to receive the loan.

This year's failure to meet forestry commitments has irked
donor countries during previous meetings with the government.

The unrealized targets cover the combating of illegal logging,
speeding up forest resources assessment and restructuring the
country's timber industry.

But foreign support to Indonesia has strengthened since the
new government took over with an economic team perceived as
market friendly.

Indonesia is also close to signing a new lending agreement
with the IMF, or Letter of Intent (LoI), that would unlock a long
delayed $400 million loan tranche to the country.

Securing a deal with the Fund is seen as essential to restore
Indonesia's tarnished image before the foreign financial
community.

The IMF had suspended its $5 billion loan program for
Indonesia last December, over the previous administration's
failure to meet its LoI reform targets.

Bank Indonesia Governor Sjahril said the government and the
IMF had agreed on the monetary targets for the new LoI.

"I can't tell you any figures yet; wait until Monday's
announcement," he told waiting reporters.

The IMF had earlier demanded a base money target of Rp 108
trillion, but sources said that Bank Indonesia had been
negotiating with the Fund to relax the target slightly.

Singh said his team would be in Indonesia until next Monday.
(bkm)