IMF team to review reform program next week

JAKARTA (JP): The International Monetary Fund (IMF) review team will resume talks with the government next week over the country's economic reform program, said Coordinating Minister for the Economy, Finance and Industry Kwik Kian Gie.

He said the discussion with the IMF team would focus on new economic measures needed by the country to resolve its current economic crisis.

"It will be a regular meeting ... We'll discuss new programs for the future," Kwik told reporters on the sidelines of a seminar.

He said the IMF team, which will be in Jakarta from June 12 to June 22, would not review the performance of the government in implementing the ongoing economic programs as the deadline for the implementation of most of the key economic measures fell at the end of this month.

The IMF has recently disbursed a US$372 million loan to the country after the fund approved the government's new letter of intent, which contains a set of key economic measures mostly to be completed by the end of June.

This was the second disbursement out of the $5 billion loan promised by the fund in January to help finance the country's economic reform program.

The loan was supposed to be disbursed in April, but was delayed due to the slow progress of the government in implementing key economic measures.

IMF Jakarta representative John Dodsworth had reportedly criticized the government earlier this week for its inconsistency in implementing key reform programs.

But Kwik said the accusation made by Dodsworth was "confusing".

"I don't understand what he means by inconsistency. He talks just like other Indonesian analysts. If there are inconsistencies in the programs, he should specify which ones and in what case," he said in response to questions from journalists.

Kwik also attacked former IMF Asia Pacific director Hubert Neiss' recent comments in the foreign media that Indonesia might suffer a second round of the economic crisis if the rupiah tumbles to between Rp 9,000 to Rp 10,000 to the U.S. dollar.

The rupiah has been under pressure over the past month, particularly due to domestic political uncertainty and social unrest.

The rupiah closed at Rp 8,605 to the U.S. dollar on Friday, which is much weaker than the government's target of Rp 7,000 to the dollar for this year.

Kwik said the volatility and weakening of the rupiah was also a consequence of when the country adopted a free-floating exchange rate system in August 1997, allowing the exchange rate of the rupiah to be decided by market mechanisms.

"Neiss' comments could be true or false ...," he said. But he added that Neiss should have realized that the fluctuation in the exchange rate of the rupiah was a consequence of the free- floating system, which was strongly supported by Neiss when he was still at the IMF.

"So I can't understand why he should say such things after he's now at the Deutsche Bank," Kwik said.

Asked to comment on the plans by the central bank to continue raising the interest rate of its SBI promissory notes if the rupiah continued to weaken, Kwik said: "It's the policy of Bank Indonesia. The government will not intervene because Bank Indonesia is an independent central bank."

He also said Bank Indonesia had to raise the interest rates because interest rates overseas had also increased.

"If Bank Indonesia didn't increase the interest rate, people would park their money overseas," he said.

The interest rate of one-month SBI notes increased to 11.13 percent on Wednesday compared to 11.07 percent the previous week.

An increase in the domestic interest rate would create more of a burden for the government as it had issued a massive amount of bonds to help finance the recapitalization of the country's banks. A large part of the bonds carry a variable interest rate.(rei)