IMF review team arrives

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.