IMF satisfied with new timetable for bank debts

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)