IMF likely to resume financial aid to RI soon
IMF likely to resume financial aid to RI soon
WASHINGTON (Dow Jones): The International Monetary Fund's executive board is expected next week to back resumption of credit outlays to Indonesia, although the initial outlays are likely to total around $1 billion a month, monetary sources said Monday.
The officials, speaking to Dow Jones Newswires on condition of anonymity, said there isn't any reason at this time to expect a further delay in credit outlays to Indonesia.
However, one source said that program implementation isn't yet seamless, and if there are signs Indonesia is backpedaling on commitments to the fund it is likely that the institution's executive board would again suspend credit disbursements.
"I'd be very surprised if it turns out we don't elect to go ahead with a credit outlay next week," the source said, when the IMF's 24-member board reviews Indonesia's program on May 4.
The IMF delayed a $3 billion credit outlay in March over Indonesia's failure to implement key terms of its agreement with the IMF.
The suspension caused the Manila-based Asian Development Bank to withhold disbursing its $1.5 billion loan to Indonesia aimed at reforming and strengthening the country's financial and banking sectors.
However, an ADB official said in Geneva on Monday that the bank is ready to disburse the first tranche of a $1.5 billion loan to Indonesia, but is waiting for the International Monetary Fund to take the lead.
The ADB is holding its annual meeting in Geneva through this week. The gathering brings together senior central bank and finance officials from the ADB's 56 shareholder countries.
The ADB loan supports the IMF's rescue package for Indonesia, which requires sweeping reforms to the country's trade, industry and energy sectors.
Exactly when the loan's first tranche will be made available -- and how much this will be -- remains unclear, but ADB officials believe little now stands in the way of the loan finally going through.
An ADB official stressed the loan's first tranche won't be disbursed until the IMF makes its first payment to Indonesia. But the bank's board is prepared to meet this week to agree in principle to unlock the loan.
Under a revised program agreement reached earlier this month, Indonesia is subject to monthly performance reviews versus quarterly reviews under the initial IMF program. And while the IMF hasn't announced a new disbursement schedule, it is likely that the delayed credit, and subsequent tranches, will be split into thirds.
Indonesian financial markets were roiled Monday by speculation that the IMF will continue to hold up disbursements from the existing $10.1 billion standby credit arrangement when its board reviews the new program terms next week.
The speculation has focused around the dismantling of Indonesian cartels and monopolies with close ties to the Soeharto family, in particular. And while these issues could well remain contentious, the signals from Washington are that there is forward movement by Indonesia on implementation of badly needed economic reforms and there isn't yet a reason to hold up outlays further.
Dismantling of monopolies isn't seen as a minor point, however. And IMF officials have underlined that Indonesia's monthly monitoring is deliberately designed to keep pressure on the government to reform.
At the same time, the IMF and Indonesia have reached understandings at this stage that require some positive response from the institution, officials have said. For that reason, credit is expected to resume.
"We're at a point where there are a lot of little things happening," an international monetary source said. "There's a minor flare-up a day."
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