IMF team to visit Jakarta on new LoI talks

Berni K. Moestafa, The Jakarta Post, Jakarta

A team of the International Monetary Fund (IMF) is scheduled to arrive in Jakarta later this week for preliminary talks on the upcoming letter of intent (LoI) with the government, the IMF said on Monday.

"The discussion with the (Indonesian) authorities for the fourth review will center around the macroeconomic framework for 2002, a review of policy developments on the issue in the August letter of intent and key economic and structural reforms for 2002," the IMF's senior resident representative in Indonesia, David C. Nellor, was quoted as saying by Dow Jones wire service.

While in Jakarta, the team will meet economics ministers, and officials of Bank Indonesia and the Indonesian Bank Restructuring Agency (IBRA), he said.

The IMF team's arrival will come at a time when the government is scrambling to meet the targets it promised the fund in the Lol signed in August.

They include privatization proceeds of Rp 6.5 trillion (about US$596 million), of which none has been raised.

The government's hopes of raising Rp 5 trillion from divesting its shares in PT Semen Gresik may be dashed over locals opposing the sale.

IBRA's asset sales target also appears at risk, with questions lingering over the sale of PT Bank Central Asia (BCA) on time.

Analyst have described the sale of BCA and Semen Gresik as a litmus test on Indonesia's ability to push ahead with privatization.

Exacerbating this difficulty is the diminishing foreign investors' appetite for Indonesian assets in the wake of the Sept. 11 terrorist attacks in the United States.

Last year, the IMF withheld a $400 million loan tranche to Indonesia on signs of the country faltering on targets, including BCA's sale.

Proceeds from IBRA's asset sales and privatization is expected to help cover this year's state budget deficit of some Rp 51 trillion.

Other LoI targets at risk include performance in the monetary sector, which is feeling the brunt of the global downturn.

The LoI targets are already downgraded versions of the original ones under the LoI signed in September last year.

The revisions followed nearly seven months of political turmoil preceding president Abdurrahman Wahid's ouster, which had crippled effective decision-making by the government.

Nellor further said that the IMF team would also attend Wednesday's meeting of the Consultative Group on Indonesia (CGI).

The CGI groups together Indonesia's major donors, and their meeting in Jakarta will discuss ways for further loan support.