IMF to delay aid until mid-May

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)