IMF review team arrives
Berni K. Moestafa The Jakarta Post Jakarta
Representatives from the International Monetary Fund (IMF) arrived in Jakarta on Thursday for a two-week mission to review the government's progress in meeting reform targets under the letter of intent (LoI).
"We're here for the fifth review of the program," IMF senior advisor for the Asia Pacific department and team leader Daniel Citrin told reporters at the Ministry of Finance, where the team met senior economics ministers.
His team makes regular visits to Jakarta to monitor progress in achieving reform targets, and draft new ones for the next LoI.
The LoI is a lending agreement containing reform policies, which the government complies with in exchange for IMF loans.
On Monday, the fund approved the disbursement of US$341 million in loans, after its board of executives passed the latest LoI, which the government signed last December.
Citrin and his team arrived at the same time Jakarta is expected to finalize the crucial sale of Bank Central Asia (BCA).
A staunch sponsor of state asset sales and free market principals, the IMF has tied its loan program to the successful sale of strategic state assets.
BCA's sale forms part of the current LoI reform targets. Its frequent delays in the past contributed to the eight-month-long suspension of the IMF loans until August of last year.
Entering its final stage, BCA's sale has become a litmus test for the government to secure asset sales.
"I don't know the details, so far the BCA sale process has been appropriately conducted," Citrin said.
Also on the agenda of the review team is a government plan to grant bad debtors a grace period of up to 10 years.
Citrin said it was too early to comment on the plan.
Earlier, IMF senior resident representative for Indonesia David C. Nellor said the fund's team would like to know the government's intentions behind such a plan.
Proposed by the Indonesian Bank Restructuring Agency (IBRA), the plan seeks to entice bad debtors to begin payments after over three years of neglect.
There are strong doubts, however, as to whether incentives -- instead of punishment -- would be the most appropriate way to get uncooperative debtors to pay back their loans.
The plan may also come into conflict with the current LoI, implying that a need exists for stronger legal action against outstanding debtors.
"IBRA intends to make more decisive action against noncooperating debtors ... In future, IBRA envisages more regular use of its PP17," point 34 in the current LoI says.
The PP17 refers to government regulation 17 on IBRA.
Armed with this, IBRA possesses special legal powers to go after bad debtors, but critics say utilization of these powers is low, if not nonexistence.
The LoI expects the government to finalize by end of March the necessary steps needed to force bad debtors into paying.
For its part, the government has formed a team which will have until mid February to review the debt extension plan.