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.