IMF satisfied with new timetable for bank debts

JAKARTA (JP): The International Monetary Fund's (IMF) Asia Pacific director Hubert Neiss expressed satisfaction on Wednesday over the new repayment scheme for a large proportion of more than Rp 141 trillion (US$18 billion) in government loans injected into troubled banks.

Neiss said that the new format would allow the government to get a maximum return on the loan, and at the same time preserve the companies surrendered as collateral by the owners of the banks.

"It's a good agreement. It allows the government to get a maximum value from the assets which the debtors are committed to paying," he told reporters following a regular monthly review meeting with senior economic ministers.

The government reached a new repayment deal on Tuesday with owners of five troubled banks for Rp 96.53 trillion in liquidity support injected by Bank Indonesia into the institutions since early this year.

The bank owners would repay 27 percent of the loans in cash in the first year, and the balance in equal installments over the next three years.

The repayment would come from the sale of fixed assets in the form of shares in various companies surrendered by the bank owners as collateral in September.

The new format is a revision of the Oct. 1 scenario made by President B.J. Habibie that demanded bank owners repay the loans in cash in one year.

The changes were made following an Oct. 18 letter from Neiss to Habibie urging the government to be flexible with the repayment mechanism as a fire sale of assets under the current depressed economic conditions would result in lower than realistic prices.

The government has yet to reach agreement with owners of seven other banks on the new repayment terms.

Neiss said that the bank owners who had reached agreements with the government were committed to making their best effort to preserve the value of the collateral assets and to achieve the best sales to make payment as quickly as possible.

"But best efforts will depend on prevailing macro-economic conditions," he added.

Neiss arrived in Jakarta on Tuesday afternoon to conduct a regular monthly review of the country's economic reform program.

"We've almost completed (the review)... and we may finalize it before Ginandjar leaves for Kuala Lumpur," he said, referring to Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasmita who is scheduled to go to Malaysia for the APEC summit on Friday.

Neiss said that the focus of the current review was efforts to accelerate the bank restructuring program, and acceleration of expenditure on social programs.

Asked by reporters about demands to postpone the country's bank recapitalization program, he said: "No, because the sooner that can be done the better."

The government has required all of the country's more than 200 commercial banks to have a minimum 4 percent capital adequacy ratio by the end of this year, which most bankers have deemed impossible to fulfill amid the current tight liquidity situation.

The government on Wednesday moved ahead with its efforts to expand and accelerate the country's multibillion dollar social safety net program aimed to help the poor survive the current economic crisis.

President B.J. Habibie has appointed former finance minister Mar'ie Muhammad to act as the head of the monitoring committee to make sure the program will not be corrupted by government officials.

Mar'ie, who is regarded as Indonesia's "Mr. Clean", is currently chairman of the Indonesian Transparency Society.

"It's an excellent appointment... it shows a real commitment on the part of the government for transparency and managing the social safety net program effectively," said the World Bank's Indonesia director Dennis de Tray.

The World Bank has been putting pressure on the government to make sure the social safety net program, which is mostly financed by the international community, is not abused.

The government has been slow in implementing the social safety net program during the first semester of the current fiscal year due to worries over corruption possibilities. The government now says it is determined to accelerate the program. (rei)