IMF tells IBRA to sell rescued banks: Report

IMF tells IBRA to sell rescued banks: Report

WASHINGTON (Bloomberg): The Indonesian Bank Restructuring
Agency must sell two banks it rescued three years ago before the
International Monetary Fund will resume lending to the nation,
fund officials told the Financial Times.

The agency's sale of PT Bank Central Asia and PT Bank Niaga
using "robust and transparent guidelines," is one of three steps
Jakarta must make before the fund provides a $400 million
disbursement delayed since December, the fund said.

"This is a litmus test of the government's intention to return
assets to the private sector," said Anoop Singh, the fund
official who conducted negotiations with Indonesia, the newspaper
reported.

Indonesian officials said this week that they will speed the
overdue sales.

In addition to the bank sales, which Indonesia had pledged to
do by the end of last year, Singh told the Financial Times that
Indonesia must take actions to make sure provinces don't rack up
large debts and to maintain the independence of the central bank.

A fund spokesman confirmed the report, which expanded on a
fund statement a week ago. The three-year, $5 billion IMF loan
program is a key sign of outside support for Indonesia's
politically troubled regime.

IMF support is watched closely by foreign investors as a
signal that the country is making key economic policy
reforms.

"We've made a number of recommendations on how (the central
bank's) accountability and transparency could be strengthened
without compromising its independence,'' said IMF spokesman
Thomas Dawson.

With the former central bank director arrested on corruption
charges, the government has pushed legislation to make it easier
to remove the bank's governor and make the bank report to the
government and legislature. The fund has said those moves could
undermine its independent monetary policy.

"The process that might be under way -- if pursued and
implemented -- could in a lasting way damage the independence of
Bank Indonesia,'' Singh said.

The IMF's criticisms come as the latest in a series of
political crises has hit Jakarta.

Last week, parliament formally warned President Abdurrahman
Wahid that his involvement in two corruption scandals violated
the constitution and may lead to his impeachment.