IMF says talks continuing on Indonesia's loan program

IMF says talks continuing on Indonesia's loan program

WASHINGTON (Dow Jones): The International Monetary Fund is trying to overcome several sticking points in negotiations with Indonesia and Russia over the state of their loan programs.

Thomas Dawson, director of external relations at the Fund, told reporters at a regular briefing that an IMF team "would need to return to Jakarta for this current review of the program to be taken forward and ... I can't give you the sense now of when that will be."

He said the IMF is waiting for the authorities in Jakarta to finalize a revamp of the central bank that will enhance its transparency and accountability without threatening its independence.

Dawson added the IMF also wants to see proper safeguards on the fiscal decentralization program and clear progress on bad debt work-outs and asset sales under IBRA.

The IMF hasn't provided Jakarta with a third, $400 million, installment due under a $5-billion loan arrangement, approved a year ago.

At the heart of this delay is wrangling over the nature of reforms proposed for Indonesia's central bank, plans to give greater financial responsibility to the provinces, and stuttering progress in cleaning up the banking sector through the Indonesian Bank Restructuring Agency.

Dawson added at the press briefing on Friday that the Russian situation continues to be one of pretty strong growth from a macro position (and) from a balance of payments position, so any new arrangement would - as indicated before - be a precautionary arrangement.

"The IMF staff assessment is that, despite the recent decline in oil prices, the Russian balance of payments is still strong and the short-term outlook is favorable," he said.

Looking further ahead, the IMF still believes that Russia's medium-term outlook hinges on its success in implementing structural reforms, ranging from basic contract law through to a stronger, more transparent and accountable central bank.

For the moment, however, Dawson acknowledges that "there is no financing gap" in Russia that demands IMF assistance, and so the long process of negotiating a precautionary loan arrangement goes on.