IMF sees Indonesia board meet late August

IMF sees Indonesia board meet late August

WASHINGTON (Reuters): The International Monetary Fund said on Wednesday that it expects its executive board to discuss lending for Indonesia at the end of August or in early September.

"We are looking for the board meeting to come after the (board's summer) recess," IMF External Relations Director Tom Dawson told reporters at a briefing.

After the briefing Vasuki Shastry, an IMF spokesman, confirmed that the meeting is expected to take place at the end of August or in early September. The IMF board is due to take two weeks recess in the middle of August.

Dawson said he did not know whether an IMF mission would visit Indonesia before the board meeting, but said there was no need for a mission to visit just to meet the new government.

Dawson said this was because IMF officials had met with Megawati Soekarnoputri, Indonesia's new president, when the last IMF mission visited the country.

However, he said there could be other reasons for a mission to visit the country.

Indonesia initially expected to secure the IMF Letter of Intent (LoI) earlier this month and unlock the Fund's US$400 million loan tranche.

A LoI will contain a set of economic reform targets, which Indonesia must meet in order to obtain the fund's loan.

Indonesia's poor record of meeting the targets contained in the current LoI caused the IMF to freeze its loan program last December.

The government and the IMF have said their priority is to sign a new LoI before the Paris Club meeting in September.

Failure to do so would put at risk the debt rescheduling agreement between Indonesia and its sovereign creditors under the Paris Club. The meeting is slated for the first week of September.

The Paris Club agreed to reschedule $2.8 billion in debts this year, on the condition that the government sign a new LoI with the IMF by March. Because the LoI was not signed, the group is now free to collect the debts anytime this year.

Economist Dradjad Wibowo of the Institute for the Development of Economics and Finance has said neither the IMF nor the government could afford to miss the deadline.

"If missing the deadline leads to a negative note from the Paris Club members, this will be counterproductive for the IMF itself," he warned.

He said the country members of the Paris Club would want to prevent providing reserves for writing off Indonesia's bad debts.

But should they demand payment, it would send Indonesia teetering toward bankruptcy, he said.