IMF tells govt to delay new policy on ex-bankers
The Jakarta Post, Jakarta
The International Monetary Fund (IMF) had told the government to delay a controversial decision to ease repayment terms on the huge debts owed to the state by former bank owners, pending a review by the Fund, a minister said on Friday.
State Minister of National Development Planning Kwik Kian Gie said that the IMF would send a team from Washington to Jakarta to investigate the much-criticized policy further.
"The IMF has asked us to put the government decision on hold because they want to know more," he told reporters.
"And because of this, they will send a special team from Washington to Indonesia," said Kwik, who also heads the National Planning Agency.
Indonesia is currently tied to the IMF under a three-year US$5 billion loan program, which requires the crisis-hit country to implement its economic reform policies according to the conditions imposed by the Fund.
Disputes over policy would pose a serious threat to the sustainability of the loan program, something that the country cannot afford to risk as a suspension would also hurt fragile market sentiments.
According to Kwik, the government will discuss the debt extension plan further during the upcoming cabinet meeting next Monday.
The so-called Financial Sector Policy Committee (FSPC), which groups senior economic ministers and has the final say on the country's major debt and bank restructuring programs, decided late last year to extend the debt repayment period for former bank owners from four years to 10 years.
The committee also softened the interest rate terms to 9 percent from a rate based on Bank Indonesia 3-month SBI promissory notes, currently standing at 17 percent.
The committee said that the new policy was needed to allow the government to recoup the loans extended to the banks at the height of the 1997 financial crisis.
During the 1997-1998 crisis, the government injected some Rp 144 trillion (US$14 billion) worth of liquidity support loans into local banks, in a bid to prevent the collapse of the country's banking system. The bank owners are required to repay these loans.
The revised deal has sparked controversy among analysts and top politicians who have questioned the government's softer stance toward the debtors, most of whom have not even begun the repayment process.
Critics argue that there is no guarantee the debtors will be more cooperative after the extension, while at the same time the public has to endure the lower interest payments resulting from the extension.
In its defense, IBRA has repeatedly said that most debtors have deferred making the repayments because four years was too short a period to cover their debts.