IMF to delay aid until mid-May

JAKARTA (JP): The government said on Wednesday it was working all out to meet the targets of its reform measures as agreed with the International Monetary Fund (IMF), but hinted that the next US$400 million tranche of the IMF bailout fund could still be delayed.

Chief economics minister Kwik Kian Gie said after a Cabinet meeting presided over by President Abdurrahman Wahid that there were still two days remaining before the March 31 deadline to speed up some of the reform programs.

"If there is any delay, it may be only for a few days," Kwik added.

But the IMF chief representative here, John Dodsworth, said late on Wednesday afternoon the next disbursement could be delayed until mid-May from its original schedule of April 4.

The Cabinet meeting, scheduled to discuss regular economic issues, was dominated by the controversy over the IMF aid delay, which was sparked on Tuesday by Abdurrahman's remark that the IMF executive board would meet on April 15 to release the next disbursement of aid to Indonesia.

Dodsworth immediately denied that such a meeting had been scheduled. He even indicated that the next tranche could be delayed indefinitely due to slippages in many of the reform measures.

Kwik got the bad news after a meeting he had especially asked for with the IMF chief representative John Dodsworth late on Wednesday afternoon.

The delay will not only be for a few days as he estimated, but most probably for six weeks.

Dodsworth said after his talks with Kwik that the IMF board meeting would probably be delayed until the second week of May, but it really depended on the IMF review.

"We see that the review will be completed sometime in the first half of April. And after the review, it needs about three weeks until the executive board can meet," he said.

He said the bulk of the structural measures as agreed to in the letter of intent were still outstanding, but added he believed they could be implemented in the next two weeks.

Dodsworth reiterated several top-priority programs, including corporate restructuring strategy and its framework, which should be in place by mid-April, recapitalization of state banks and reform of the tax system.

He also stressed the need for good procedures within IBRA for debt restructuring and a more effective bankruptcy court to deal with noncooperative debtors.

The controversy over the IMF aid rattled the foreign exchange market on Tuesday and Wednesday.

Separately, the IMF stated in Washington on Tuesday that Indonesia had asked for more time to agree on the economic reforms necessary for its next loan disbursement.

The IMF said the timetable for the second loan disbursement had been put back at the request of the Indonesian government so it could agree on how to comply with reforms demanded by the IMF.

"The government's economic team requested more time to reach full consensus on the corporate restructuring strategy, and to advance implementation in other areas of the programs," said Anoop Singh, deputy director of the IMF's Asia and Pacific department.

Finance minister Bambang Sudibyo, who accompanied Kwik at the media conference, said a delay in IMF aid disbursement, if it occurred, would not affect the state budget.

"But we would be in big trouble if the World Bank, Asian Development Bank or other creditors also held up their loan disbursements.

"There would also a big problem if Indonesia's meeting with the Paris Club of sovereign creditors scheduled for April 12 to April 13 to negotiate a rescheduling of $2.1 billion of our foreign debts failed to materialize," Bambang added.

The 2000 state budget for the April-December period envisages a smaller foreign debt burden, assuming that $2.1 billion in foreign debts is rescheduled with the Paris Club creditors.

Bambang said despite some problems with the reform programs, the IMF would not likely intervene and stop the debt rescheduling meeting.

"After all, IMF credibility is at stake here. If its bailout program here fails, its reputation will be damaged," he added.

Bambang nonetheless conceded that the timetable of the Paris meeting might be delayed until after a satisfactory review of Indonesian reform programs by the IMF.

Dodsworth cautioned last week that a delay in IMF aid might cause difficulties for the Indonesian government to secure a deal from the Paris Club.

Cacuk Sudarijanto, chairman of the Indonesian Bank Restructuring Agency (IBRA), who also attended the media conference at the President's Bina Graha working office, said he would speed up the transfer of bad loans from state Bank Mandiri and Banks BRI, BNI and BTN to IBRA before the March 31 deadline.

Recapitalization

Cacuk added that his staff were now working all out to complete the recapitalization of Bank Niaga, Bank Bali, Bank Bukopin and Bank Danamon before the March 31 deadline agreed with the IMF.

On the Rp 17 trillion revenue target IBRA has to transfer to the state coffers before March 31, Cacuk said his agency had surpassed the target by Rp 2.61 trillion, even though Rp 4.25 trillion of the total would be transferred in the form of treasury bonds and the remainder in cash.

Separately, House of Representatives Speaker Akbar Tandjung blamed the probable delay in IMF aid on Abdurrahman's lack of focus on economic issues.

"The Cabinet is not solid and its economic team lacks operational leadership," Akbar said.

He therefore urged the President to focus on economic programs and to refrain from making statements that caused uncertainty instead of clarification.

"The government should show a sense of crisis and a sense of urgency," Akbar added.

Economic analyst Sjahrir blamed the IMF disappointment mainly on the nonfunctioning judicial court, which he said allowed those with political influence or power to escape the law.

"The President has also been very slow in reforming the government bureaucracy. He instead is slowing down the decision making process by setting up numerous councils of advisors," Sjahrir added. (prb/udi/bkm/vin)