IMF may disburse $400m loan to RI soon

IMF may disburse $400m loan to RI soon

WASHINGTON (Bloomberg): Indonesia has made "a lot of progress"
toward meeting International Monetary Fund conditions, making it
likely the country will get a US$400 million loan disbursement in
May, a fund official said.

The IMF plans to send a staff mission to Jakarta later this
month to determine whether it can recommend to its executive
board release of the disbursement, said Anoop Singh, the IMF's
Asia and Pacific department's deputy director.

"The message at this point is fairly upbeat," Singh said.

IMF expects to make about $2 billion in loan payments to
Indonesia this year, Singh told reporters in Washington. That's
only slightly less money than what was expected to be disbursed
before the IMF held up this $400 million disbursement April 4
because of fund concerns about the pace of Indonesian economic
reforms, he said.

Singh's comments indicate that recent policy developments in
Indonesia are swaying IMF officials in favor of maintaining
support.

"We have been greatly reassured by the steps they have taken
in the last three weeks," Singh said.

Most recently, Laksamana Sukardi, the newly appointed head of
the Jakarta Initiative Task Force, said yesterday that the
government is willing to waive withholding taxes for two or three
years on revamped loans to the more than 300 companies registered
with the restructuring body.

The Indonesian investment minister announced new incentives
to speed up the restructuring of more than $70 billion in bad
debt to lure foreign investors back to the nation.

Just one week ago, however, Indonesian Finance Minister
Bambang Sudibyo accused the International Monetary Fund and the
World Bank of excessive interference in the economy.

Indonesia is recovering from its worst recession in decades
with the help of a more than $50 billion bailout led by the IMF,
yet Bambang said the Washington-based lending agencies are trying
to micromanage the country's revival. The IMF approved in
February a $5 billion, three-year loan for Indonesia to bolster
the economy's revival.

"The World Bank and the IMF are too interventionist,"
Bambang said to reporters.

The IMF and World Bank have gone so far as to oversee the
government's negotiation of performance contracts with executives
at state-run PT Bank Negara Indonesia, scheduled to receive $3.9
billion in support from the government, Sudibyo said. The
contracts -- which lay out operational targets -- are a condition
to receiving state support.

Yet Singh said the postponed disbursement shouldn't draw
attention.

"A month's delay in the disbursement is not material," he
said. "This is not an emergency."

Indonesia's economy, which contracted by 13 percent in 1998,
and 0.2 percent in 1999, may grow up to 4 percent this year,
Singh said.

Yet it won't recover from its recent recession until 2003,
said Reza Moghadam, the IMF's division chief for Indonesia.

Singh also defended the IMF criticism of it policies, made by
many of those who are planning mass protests and acts of civil
disobedience during the IMF and World Bank's meetings on Sunday
and Monday. Many of the fund's critics, including former World
Bank chief economist Joseph Stiglitz, say that following IMF-
backed policies helped cause and deepened the recession in
Indonesia.

"In our view (the recession) ended sooner because of the
program" with the IMF, Singh said. "The country officials that
have brought this about are fully aware of this."

Singh was speaking one day after a group of 17 sovereign
lenders, including the Group of Seven industrialized nations,
accepted the delayed repayment of $5.8 billion of Indonesia's
debt owed between this year and the end of first-quarter 2002.

Known as the Paris Club, the group of creditors said this debt
will be repaid in the medium and long term, without giving
further details. The debt rescheduling concerns repayment of the
principal, $2.2 billion of which was due this year, $2.9 billion
in 2001, and $700 million in the first quarter of 2002.