IMF letter fires warning shot at RI

IMF letter fires warning shot at RI

HONG KONG (Dow Jones): Frustrated by the slow pace of economic reform, the International Monetary Fund has fired a warning shot across the Indonesian government's bow, the Far Eastern Economic Review reports in its latest edition to be published Thursday.

In a tersely worded letter dated Nov. 8 and obtained by the magazine, Anoop Singh, the Fund's Washington-based deputy director for Asia and the Pacific, demanded that Jakarta move decisively to minimize risks in its fiscal decentralization plan, use higher oil revenues to repay government debt and set a firm timetable for asset sales.

Failure to do so by early December, the letter suggests, could stop the IMF's board from approving fresh loans to the country. IMF officials in Washington refused to comment on the matter.

In the three-page letter, Singh details "the main actions which were due to be implemented by end-October...and which have yet to be completed."

One of the IMF's top concerns is Indonesia's proposed devaluation of fiscal authority from the center to local governments - part of a sweeping new decentralization program scheduled to take effect on Jan. 1. The IMF wants Jakarta to prohibit local governments from borrowing independently from abroad and from borrowing independently at all through 2001.

The IMF has long been critical of what one Fund official calls "the politicization of IBRA."

Now it wants IBRA to "publish a detailed asset schedule for the first half of 2001 after securing letters of commitment from asset owners and appointing financial advisors in all cases," according to the letter.

The IMF also wants the government to get parliament's approval to reschedule the delayed sale of two banks - Bank Central Asia and Bank Niaga. Finally, it wants IBRA's debt restructuring of its 21 largest debtors subject to "independent assessment from IBRA's oversight committee."