IMF insists local firms repay debts

JAKARTA (JP): The International Monetary Fund (IMF) has asked the government to push recalcitrant indebted companies to repay their foreign debt, Coordinating Minister for the Economy, Finance and Industry Kwik Kian Gie said.

Kwik said on Wednesday that debtors who had good intentions to come to the negotiation table to repay their loans would be given incentives, while those who did not would be handed over to the Attorney General's Office.

"This is an agreement between the government and the IMF so that Indonesian debtors will have good intentions to negotiate and repay (their overseas obligations)," he said following a meeting with senior government officials and the IMF team.

Slow progress with the corporate debt restructuring program is one of the several key economic reform measures which was unable to be carried out by the government as promised in a letter of intent (LoI) to the IMF in January.

The delay in implementing the key economic measures has forced the fund to also postpone the disbursement of some US$400 million in bailout loans to the country.

Some 2,200 local private companies have some $67 billion in overseas borrowings. Most firms had stopped repaying their debt after the rupiah plunged in value to the U.S. dollar in the middle of 1997.

Only a handful of companies have reached a debt restructuring agreement with their foreign creditors.

Kwik reaffirmed he was confident that the government would be able to complete the implementation of the delayed key reform measures by the new deadlines.

He said that several "items" would be executed by April 8, while others would be completed by April 12.

The government was supposed to complete a host of ambitious economic programs by the end of March to allow the IMF to disburse its funds on April 4.

IMF Jakarta representative chief John Dodsworth said last week that the IMF money would be disbursed in May.

Kwik was also optimistic that the Paris Club of creditors meeting would be held as scheduled from April 12 to April 13 to discuss the rescheduling of the country's sovereign debt.

The government has proposed to reschedule some $2.1 billion in government overseas loans to help ease the pressure on the state budget.

Many have said support from the IMF is crucial for Indonesia to win agreement from foreign creditors for the debt rescheduling proposal.

The delay in the implementation of key measures set in the LoI has raised the criticism that the economic team of President Abdurrahman Wahid is weak and lacks coordination.

The critics have even urged President Abdurrahman Wahid to reshuffle the Cabinet.

Critics have also said the ministers were mostly focusing on politics rather than concentrating on accelerating economic reforms.

But Kwik dismissed these suggestions.

"We remain a solid (team). Those who have accused us of not being coordinated have never seen how hard the economic ministers work," he said.

"They also do not know that the economic ministers have had marathon meetings."

The government said the delay in the disbursement of IMF aid had no significant impact on state finances, pointing out that the condition of the country's balance of payments was still adequate for six months of imports.

But he acknowledged that implementing the key economic reform programs was essential in renewing confidence in the ailing economy.

Bank Indonesia Governor Sjahril Sabirin said on Monday that the weakening of the rupiah against the U.S. dollar lately was caused by reports of delays in the implementation of IMF- sponsored economic reform programs.

The rupiah closed at Rp 7,750 per U.S. dollar on Wednesday from Rp 7,700 during the previous trading day.

Meanwhile, Gadjah Mada University economist A. Tony Prasetyantono conceded that completing the economic reform agenda was crucial to reviving confidence in the economy.

He said judging from the statements made by IMF's Dodsworth, the fund was particularly concerned over the internal rifts among economic ministers who came from various political parties, and the overgenerosity shown by the government to local debtors. (rei/prb/sur/25)