IMF to disburse $400m loan to Indonesia later this month

IMF to disburse $400m loan to Indonesia later this month

JAKARTA (JP): The International Monetary Fund is expected to
disburse another US$400 million of its $5 billion bailout fund to
Indonesia by the third week of this month, IMF representative in
Jakarta John Dodsworth said on Wednesday.

Dodsworth said the Indonesian government would sign its new
letter of intent (LoI) to the IMF on Thursday and the Fund's
board would convene in Washington around the middle of this month
to decide on the next (third) tranche of loan disbursement.

The approval of the LoI, which essentially stipulates economic
reform measures to be implemented by the government within a
certain period of time, will pave the way for the loan
disbursement.

"Hopefully in the third week of this month we will make the
disbursement," Dodsworth told a seminar.

He said that the fund would not make any delay in the loan
disbursement although some programs supposedly to be completed in
August and September had been pushed back to October.

The IMF is providing the administration of President
Abdurrahman Wahid with some US$5 billion in bailout cash to help
the country finance its three-year economic program.

The Fund has so far disbursed more than $700 million since it
made the pledge in January.

Dodsworth said that the new LoI, which will be disclosed to
the public on Thursday, would essentially be the same as the one
signed by the government on July 31, except for the stipulation
of a 10-point economic program recommended by the new economic
team.

The previous LoI was prepared by then chief economic minister
Kwik Kian Gie in cooperation with a visiting IMF review team.

Rizal Ramli suggested immediately after his installation as
the new Coordinating Minister for Economic Affairs late last
month that the LoI be slightly amended to accommodate the latest
economic developments.

He reasoned that the revision was needed because of
significant differences in the current conditions compared to
those prevailing when the last review of the economy was made in
early July.

The IMF sent its deputy director for the Asia Pacific region
Anoop Singh to Jakarta last week to negotiate the slight
amendments to the LoI with Rizal.

The IMF was supposed to disburse the $400 million loan late
last month, but the disbursement was delayed after the new
economic team called for a revision of the LoI.

Dodsworth said that although there were no major changes in
the new LoI, the World Bank would now been given the opportunity
to take the lead in the discussions on agriculture issues.

Rizal, an economic analyst before his appointment to the
Cabinet, had been known as a strong critic of the IMF-sponsored
program. He blasted the IMF for what he saw as its 'excessive'
meddling in microeconomic issues such as those concerning the
agricultural sector.

He argued that the Fund's core competence was in monetary
issues.

Dodsworth said that the revised LoI continued to emphasize
bank and corporate restructuring, and the sale of the assets held
by the Indonesian Bank Restructuring Agency so as to revive
confidence and accelerate economic recovery.

Dodsworth also expressed his belief that the Indonesian
economy would grow by more than the 3-4 percent targeted for this
year.

The economy contracted by nearly 14 percent in 1998 and growth
remained flat last year.

Dodsworth shared the view of Bank Indonesia that the
government should keep a close eye on inflation.

The government has targeted an inflation rate of between 5-7
percent this year, but many believe that inflation could exceed
this target, particularly due to the recent weakening of the
rupiah against the U.S. dollar and the planned increase in
domestic fuel prices.

But Rizal played down inflation fears on Wednesday.

Speaking to reporters after a meeting between senior economic
ministers and Bank Indonesia, Rizal said that the current
inflation level was not worrying because "food-inflation" was
still low.

"I'm not worried (about the inflation trend)," he said.

Several other officials had earlier also expressed confidence
that inflation would remain in single digits this year.

Rizal also stated that he was happy with his meeting with the
other economic ministers because the discussions were quite
productive.

"There was an agreement to take concrete action to accelerate
the corporate restructuring program," he said but declined to
elaborate.

He further said that the meeting discussed current macro
economic conditions and the state of the banking sector.

Rizal added that the meeting had also agreed to push the
banking sector to provide more working capital to exporters in a
bid to bolster exports as the second locomotive, after private
consumption, for economic growth

He said that the economic team would meet with Bank Indonesia
every two weeks to improve coordination so as to create stable
macro economic conditions.(rei)