IMF delays loan disbursement to Indonesia
IMF delays loan disbursement to Indonesia
JAKARTA (Dow Jones): The International Monetary Fund will delay the next disbursement of loans to Indonesia under its US$5 billion program to early next year, a senior aide to the country's top economics minister said Thursday.
Indonesia was set to get $400 million from the IMF this month, but the money has been delayed after Jakarta missed a number of key reform commitments under its latest letter of intent with the fund.
The IMF will send a full review team to Indonesia in mid- January to check on the country's progress in implementing a number of key economic reform measures, said Dipo Alam, a top aide to Coordinating Minister for the Economy Rizal Ramli.
"The revised LOI will start to be discussed after a full mission comes to Jakarta in mid-January," Dipo told reporters.
"I expect the next tranche will come between February and March," he added.
The IMF's local representative, John Dodsworth, said the fund had to hold further discussions with Jakarta on the economic reform program before disbursing more funds.
"We still have to resolve some issues with the government," Dosworth told Dow Jones Newswires.
The Washington-based fund has voiced concern over Indonesia's decision to postpone the sale of two nationalized banks, as promised under the latest LOI, until next year.
The Indonesian Bank Restructuring Agency, or IBRA, needs to quickly sell assets and loans portfolios worth Rp 600 trillion which it took over from the banking sector after the 1997 financial crisis.
The fund is also worried about Indonesia's lack of clear plans to deal with decentralization of power to the provinces from the beginning of next year. A major fear is that a poorly managed decentralization could lead to ballooning public debt.
Indonesia makes promises to reform its economy through LOIs in return for balance of payment support from the IMF.
The delay marks the second time the IMF has held back funds from Jakarta. It had delayed a tranche in April amid concerns over the slow pace of asset sales from the broken banking system.
Although the IMF has made it clear it will continue to support the Indonesian economy in the long term, any delay of funds hurts investor sentiment at a time when the country's recovery remains fragile.
Investors are concerned that political infighting within President Abdurrahman Wahid's government is stalling much-needed reform.
Still, Indonesia's rupiah, which is down over 30 percent since the start of the year on such concerns, was unmoved by the news of the delay in very thin late Asian trade. The local currency was flat at Rp 9,430 to the dollar.