IMF team to meet new government later this month

IMF team to meet new government later this month

JAKARTA (JP): A team from the International Monetary Fund
(IMF) is slated to meet Indonesia's new government later this
month to discuss the country's progress in meeting economic
reform targets, a senior government official said on Monday.

The IMF team will hold talks with the new economic ministers,
and are also likely to meet President Megawati Soekarnoputri,
said Dipo Alam, assistant to the coordinating minister for the
economy.

"I think they will arrive here sometime in mid-August," he
said, adding that IMF Asia Pacific deputy director Anoop Singh
would be leading the team again.

Although Dipo declined to confirm the report, the IMF's
planned visit is seen by many as an effort to seek the new
governments' commitment in meeting the current reform targets.

So far, the fund remains in the dark over who will sit on the
new economic team, as Megawati has yet to announce her Cabinet.

The IMF is about to sign a new lending deal with Indonesia
that would unlock its long delayed US$400 million loan tranche.

It was supposed to sign the deal last month, but analysts said
increased political instability may have deterred the fund from
doing so.

An IMF team left Jakarta last month with only a draft of the
Letter of Intent (LoI) containing the new reform targets.

The fund suspended the $400 million loan to Indonesia in
December last year after the country backpedaled on a number of
LoI targets.

Analysts said the IMF was slow in unlocking the loan, as
political bickering undermined the government's credibility.

Dipo said the government still expected to have the final LoI
signed before early September, or before the Paris Club meets.

Indonesia's sovereign creditors under the Paris Club will
convene in the first week of September over sovereign debt
rescheduling talks.

As Indonesia failed to secure a new LoI last March, the club
members are free to collect some $2.8 billion in debts maturing
this year.

But economist Sri Adiningsih said that depending on the
reasons, the club may give in to a new debt rescheduling deal
even without a new LoI.

She added that the new government must rely on its lobbying
power to convince the IMF to resume the loans.

Time is short, however, as the IMF board will go into a two-
week recess starting in mid-August.

IMF spokesman Vasuki Shastry said a new LoI could not be
signed until after the board meets in late August or early
September.

In addition, the government has yet to conclude a number of
preconditional steps before it can secure the next LoI.

One of the steps is to publicly announce the review results of
debt restructuring deals under the Indonesian Bank Restructuring
Agency (IBRA). That, however, requires a working Cabinet to be in
place.

The IMF team is also scheduled to discuss the status of the
2001 state budget, which is at risk of missing its deficit
target.

Despite the rupiah's recent jump to the dollar, concerns
remain that the budget deficit may swell to above the targeted
3.7 percent deficit to the gross domestic product.

Meanwhile, a government source said Megawati would not likely
be able to submit the 2002 state budget draft to the House of
Representatives on time.

Normally, the government submits its budget draft in mid-
October. But with no economic ministers to help her, Megawati may
have to delay the presentation of the budget draft.(bkm)