IMF review team expected to visit Jakarta next month

JAKARTA (JP): Minister of Finance Prijadi Praptosuhardjo expressed hope on Tuesday that the International Monetary Fund (IMF) would send a review team here some time in April to negotiate a new agreement with the government that could release the third US$400 million loan tranche of a $5 billion bailout package allocated to Indonesia.

Prijadi said that a group of IMF technical experts had completed a "fact finding" mission in Jakarta last week and would report to senior IMF officials in Washington.

"I think they (the technical experts) are satisfied (with the discussions held with the government) ... and I hope the IMF review team can return in April," he told reporters on the sidelines of a meeting with the House of Representatives commission IV on infrastructure.

"I hope that we will soon reach a new agreement with the IMF," he added.

Prijadi believed that the differences between the government and the IMF had been narrowing.

The IMF postponed disbursement of the third loan tranche last December over differences with the Indonesian government regarding some reform measures being implemented, as well as delays in the execution of several reforms.

In January 2000 the IMF pledged the current administration a $5 billion loan to help finance a three-year economic reform program. The Fund has so far disbursed around $1 billion.

The IMF disbursement delay, lingering political uncertainty and security problems in several provinces have all contributed to the rupiah's drop in value to a 30-month low of Rp 11,500 per U.S. dollar earlier this month.

The delay had also prompted other international lenders, including the World Bank and the Asian Development Bank, to also cut their lending commitments to the country.

The IMF has expressed disappointment over the slow progress in the sale of assets controlled by the Indonesian Bank Restructuring Agency (IBRA), particularly the divestment of government ownership in the publicly-listed Bank Central Asia (BCA) and Bank Niaga. The divestment program was supposed to be completed in December last year, however the House of Representatives had only recently given approval for the sales.

The Fund has also expressed concern over the government- proposed amendment of the central bank law, which they feel will jeopardize the independence of Bank Indonesia. In response to this concern, the government recently agreed to the IMF's demand for the formation of a panel of international and local experts to review and provide input to the amendment of the central bank law.

The IMF has also been concerned with the poorly designed fiscal decentralization policy, fearing it could prompt regional governments to embark on a lending spree.

"Our differences over these three issues are narrowing," Prijadi said.

Elsewhere, Prijadi said that IBRA sold around $50 million of its foreign exchange holdings last week to help defend the embattled rupiah.

IBRA now holds around $500 million, mostly raised through the sale of its various assets to foreign investors.

Prijadi earlier this month asked IBRA and some state-owned enterprises to sell their dollars to help stabilize the ailing local currency.

The rupiah ended slightly lower on Tuesday at Rp 10,400 per dollar, down from Rp 10,385 on Friday, amid jitters over the domestic political condition. President Abdurrahman Wahid is scheduled on Wednesday to give his response to the House of Representatives memorandum of censure over his alleged role in two financial scandals.

Many analysts believe that the House will not be satisfied with Abdurrahman's response, a situation which could trigger an impeachment process. (rei)