IMF awaits publication of PwC reports

IMF awaits publication of PwC reports

SYDNEY (Dow Jones): Hubert Neiss, the International Monetary Fund's Asian director, said Wednesday the IMF will work with the new Indonesian government.

But he said the Fund is still awaiting the publication of an audit into the Bank Bali corruption scandal before resuming lending to the country.

"It is very important because disclosure and publication is a very efficient way to deal with corruption," Neiss told Dow Jones Newswires.

While Neiss said he had seen "a small version" of the (Bank Bali) audit, he wouldn't comment on its contents.

Neiss said the IMF is willing to work with the new Indonesian government to discuss IMF reforms, but said the timing of the IMF's next visit to Indonesia would depend on the new government.

"It is up to the (Indonesian) government to decide when is the best time" to start discussions with the IMF, Neiss said.

However, Neiss said he expects the pace of IMF reforms, which were implemented by the previous Habibie government, to be maintained by the new government.

New Indonesian President Abdurrahman Wahid Tuesday unveiled a multiparty cabinet, pledging its first task will be to get economic recovery back on track.

Wahid was last week elected President of Indonesia by the People's Consultative Assembly.

"We have reason to believe (the new government) will continue with the present strategies as contained in the IMF program," Neiss said.

"As soon as things have fallen in place in Indonesia, the new government is starting to work, I would assume the IMF, the World Bank, the Asian Development Bank would be back and resume the process of policy implementation in order to push ahead the recovery after this short interruption," Neiss said.

"Substantial international financial assistance will be needed for some time," Neiss added.

"The IMF, together with the rest of the international community, will be ready to support these efforts," Neiss said.

Relations between Indonesia and the IMF were badly damaged under the Habibie government due to the high-profile PT Bank Bali corruption scandal. The IMF, World Bank and other lenders suspended loans to Indonesia pending a publication of an independent audit into the affair.

The scandal centered on the transfer of around US$80.0 million out of the nationalized bank to a company controlled by a senior official in the former ruling Golkar party.

Apart from publishing that audit, the Indonesian government would need to continue with banking reforms and corporate restructuring, Neiss said.

The government would also need to create an incorruptible and efficient legal system, a social safety net and eventually consolidate public finances, Neiss said.

Neiss also defended the IMF's strategy in trying to restore growth to crisis-hit Asian countries.

The IMF method involves using tight fiscal policy and raising interest rates to stabilize the economies, then encouraging economic recovery through expansionary fiscal policy and restructuring the banking and corporate sectors.