IMF may again delay aid to Indonesia

JAKARTA (JP): The International Monetary Fund (IMF) representative here, John Dodsworth, confirmed on Tuesday that the IMF Executive Board in Washington won't meet on April 4, as originally scheduled, to approve the next disbursement of US$400 million in loans to Indonesia.

Commenting on President Abdurrahman Wahid's earlier remarks about an April 15 meeting scheduled by the IMF board, Dodsworth said there was no such agreement yet and he didn't know when the board would meet on the issue.

Abdurrahman said earlier on Tuesday that to his knowledge the IMF executive board would meet in mid-April to release the second tranche of the IMF's $5 billion bailout fund for Indonesia.

"As far as I know, the IMF Executive Board will meet on April 15," the President said in reply to a question as to whether the IMF had decided to delay indefinitely the next disbursement of its aid.

But the schedule cited by Abdurrahman Wahid is a delay of almost two weeks from the April 4 date mentioned by Dodsworth a week ago.

The first disbursement of $400 million was made in late January immediately after the Abdurrahman government and the IMF agreed on a completely new set of reform programs that replaced the previous ones prepared under former president Soeharto and continued by his successor former president B.J. Habibie.

The IMF held up its aid last September after the uncovering of the politically-charged Bank Bali scandal.

"There is no scheduled board date at this point in time," Dodsworth told Dow Jones Newswires.

"Certainly the loan is delayed," Dodsworth said, noting that an IMF team hasn't been able to wind up its review of Indonesia's economic program on time, due to delays in implementing the program by the government.

"The review has not been completed in terms of staff discussions yet, it's now not possible for it to be on April 4."

"Maybe there's some confusion there," he added.

"I don't know when the meeting is going to be, it depends on when we reach an agreement with the government," he said.

Dodsworth has issued strong warnings over the last couple of weeks, saying that the IMF might again delay releasing loans unless the government takes steps to implement economic reforms and the bank restructuring program.

Dodsworth has increasingly shown his frustration with the government's efforts to implement the reform measures.

He identified in a speech last week four main obstacles to a sustained recovery in Indonesia: the lack of a functioning banking system; the mountain of large unrestructured private corporate debt; a lack of confidence in public institutions, including the courts; and a lack of available capital, both domestic and foreign.

A complete lack of progress on key issues such as bank and corporate restructuring is stifling the economy and blocking new investment, the IMF says.

"How long funds will be delayed depends on implementation and progress in corporate restructuring," Dodsworth said.

He cautioned last week that Indonesia's meeting with members of the Paris Club government creditors (scheduled for April 12) for a rescheduling of $2.1 billion in sovereign debts, might be affected by a delay in IMF aid disbursement.

There has been some cause for optimism recently, he noted, referring to the Indonesian Bank Restructuring Agency's sale last week of a 40 percent stake in auto maker PT Astra International.

"The Astra sale is definitely a bright note," Dodsworth said, referring to the sales of Astra shares to an investor consortium led by Singapore's Cycle & Carriage Ltd. on Friday. (prb)