IMF tells RI to focus on meeting reform targets

IMF tells RI to focus on meeting reform targets

The Jakarta Post, Jakarta

Indonesia should not worry about the delay in loans of around
US$360 million from the International Monetary Fund (IMF), but
should continue to work on unfinished reforms targets to tap the
loan tranche, the IMF said on Monday.

"The government should not be too worried about the next loan
disbursement. It has worked hard and much progress has been
made," the IMF's senior representative in Indonesia, David
Nellor, was quoted by Antara as saying.

The Washington-based IMF board of directors postponed a
meeting last month to discuss the next loan tranche because
Indonesia failed to submit a progress report on its reforms.

The reforms targets are outlined under the government signed
Letter of Intent (LoI) to the IMF last December.

One of the overdue targets is the sale of a 51 percent share
in Bank Niaga, ending up late partly because of opposition from
legislators.

Also late is the divestment of shares of the state owned Bank
Mandiri through the local stock market. It remains unclear when
the government will proceed with the plan amid plummeting stock
prices.

A number of targets that require approval from the House of
Representatives are also falling behind schedule and must now
wait until legislators resume sitting next month.

Among them is House approval to issue perpetual promissory
notes (PPN) to replace Rp 134.5 trillions (about $14.9 billion)
of Bank Indonesia liquidity loans that were misused by Indonesian
banks during the financial crisis.

The progress report will then be signed by the Coordinating
Minister for the Economy, the Finance Minister, and the Governor
of Bank Indonesia. It has been often labeled the seventh LoI.

"I can't say when the government will send it (the progress
report) but our focus is now to support efforts made by the
government," Nellor said.

An IMF mission to Jakarta last August ended its review on
Indonesia with an upbeat note on the country's macroeconomic
stability which is the LoI's key target.

Loans from the IMF are used as a cushion for Indonesia's
balance of payments or foreign exchange reserves. This differs
from foreign creditors under the Consultative Group on Indonesia
(CGI), whose loans the government uses to finance its state
budget.

Overall the IMF provides Indonesia with $5 billion of which
$2.6 billion has been withdrawn thus far.

The loans are tied to a three-year economic reforms program
under the LoI, which the government extended by another year to
last until the end of 2003.

A spokesman for the Office of the Coordinating Minister for
Economy said the government was unsure when it could send its
progress report, adding it was hoped it would be done soon.

"We are trying to wrap it up. There is no time frame but the
government realizes that this is important as it indicates that
the government is continuing its reforms efforts," Mahendra
Siregar said, as quoted by Antara.

The importance of the IMF led reforms goes beyond securing
Indonesia's balance of payment, as foreign creditors and
investors peg their decisions on progress in the LoI targets.

To the Paris Club, under which CGI creditors discuss debt
rescheduling deals, continued support from the IMF is mandatory
before it can approve a debt rescheduling deal for Indonesia.

At the end of this month, the CGI will also meet in Yogyakarta
to discuss new loans for financing Indonesia's 2003 budget.

Mahendra said that even without all LoI reforms targets met,
Indonesia would still be able to tap the CGI loans.