IMF confirms progress has been made in talks with government
JAKARTA (JP): International Monetary Fund Jakarta representative John Dodsworth confirmed on Thursday progress had been made in resolving differences with the government over key economic reform programs.
Dodsworth said an IMF review team was expected to visit Jakarta "very soon", although no exact date had been set because there were a few remaining issues that still must be settled.
He was speaking to journalists following a meeting with Dipo Alam, a senior aide to Coordinating Minister for the Economy Rizal Ramli.
Dodsworth said among the areas of progress was the issuance of a government decree banning regional administrations from seeking loans despite the new fiscal decentralization policy.
Senior economic ministers, including Minister of Finance Prijadi Praptosuhardjo and Rizal, said earlier the differences between the IMF and the government were narrowing. In light of these developments, they expressed optimism the IMF would finally release its next US$400 million loan tranche to the country.
Prijadi said he hoped the IMF review team would arrive in Jakarta in April to sign a new agreement with the government.
Bank Indonesia Governor Sjahril Sabirin said last week mending relations with the IMF would be a significant step toward shoring up the ailing rupiah.
The IMF delayed the disbursement of the $400 million tranche late last year because of what it saw as the government's wavering commitment to the implementation of key economic reform programs, particularly the divestment of government ownership in publicly listed Bank Central Asia (BCA) and Bank Niaga.
The IMF also expressed concern with the poorly designed fiscal decentralization policy and the government-proposed amendment of the central bank law, which some observers say could jeopardize Bank Indonesia's independence.
The government is set to divest a majority of its stake in BCA and Bank Niaga in the first semester of this year following the legislature's recent approval of the sale.
The government has also agreed to the IMF's demand for the establishment of a panel of international and domestic experts to review the amendment of the central bank law.
The standoff with the IMF has prompted other key multinational lenders such as the World Bank and the Asian Development Bank to announce they may also cut assistance to the country.
This contributed to the recent fall of the rupiah to a 30- month low of about Rp 11,500 to the US dollar, forcing Bank Indonesia to sell its dollar reserves and raise interest rates to help defend the local currency.
Prijadi said on Thursday the IMF had warned the government rising domestic interest rates and the falling rupiah could seriously affect the 2001 state budget.
"The IMF has warned us about the impact of higher rates and the weaker rupiah on the state budget. In the near future, we will meet with the IMF to discuss how to overcome this problem," Prijadi told the House of Representatives' budget committee.
The benchmark interest rate on the one-month Bank Indonesia SBI note rose to 15.58 percent at Wednesday's auction from 15.24 percent.
The current state budget assumes an SBI rate of 11 percent and an exchange rate of Rp 7,800 to the dollar.
The rupiah ended lower on Thursday at Rp 10,415 against the dollar from Rp 10,378 on Wednesday. (rei)