IMF to disburse new loan to RI in January: Neiss

JAKARTA (JP): The International Monetary Fund will disburse its next tranche of loans to Indonesia immediately after the government presents in January its next state budget draft to the House of Representatives, visiting IMF Asia Pacific director Hubert Neiss said on Monday.

After meeting with senior Indonesian economic ministers, Neiss told journalists the government would unveil the April-December 2000 state budget in the middle of January.

Neiss arrived in Jakarta on the weekend to finalize talks over the country's new letter of intent (LoI) to the IMF.

The LoI comprises Indonesia's basic economic strategies to be financed by the fund.

The fund is organizing a bailout cash package worth US$46 billion for Indonesia, of which the IMF is committed to provide some $12.3 billion. It has so far disbursed more than $9.5 billion.

Indonesia must first complete a new LoI, and the IMF board of directors must give its approval to the LoI before the fund disburses a new loan.

Neiss said that some 90 percent of the LoI content had been completed, but added that the final version would be completed by the end of this year.

"I think the LoI will be published at the same time as the budget," Neiss said.

Neiss will take the new LoI to Washington for approval.

Indonesia is expected to receive $460 million in the new IMF loan.

The new loan was supposed to be disbursed in the middle of September, but the IMF suspended the disbursement following revelations in the high-profile Bank Bali scandal.

The bank scandal centers around the legally dubious transfer of some $80 million from Bank Bali to a company linked to former president B.J. Habibie's group in the giant Golkar Party.

The IMF delayed its loan disbursement after the previous administration of Habibie declined to publicly disclose the PricewaterhouseCoopers (PwC) audit report into the Bank Bali scandal.

The new administration of President Abdurrahman Wahid published the PwC report last month, prompting the IMF and other international donors to resume talks with Indonesia.

Tough issues discussed in the new LoI include agreements on how the government intends to reduce its fuel and electricity subsidies in the next state budget.

The IMF and the World Bank have pushed the government to reduce its subsidies to allow the country to have a sustainable budget and to prevent corruption.

But the government is unwilling to cut the subsidies drastically as it would push prices upward and might create social unrest.

The government is also determined to impose import tariffs on rice and sugar commodities in a bid to protect the local farmers.

The IMF has given the green light to the plans but has yet to agree on the size of the import tariffs.

Starting with the new budget, the government also plans to reduce foreign borrowing in a bid to reduce the country's dependence on foreign loans.

The government is set to unveil the next budget in the middle of January after the Moslem Idul Fitri celebration on January 8 and 9.

The government usually unveils the budget draft in early January.

It usually takes a month for legislators to approve the budget draft.

The next state budget will be a calender year budget ending in December. The current 1999/2000 state budget is a fiscal year budget ending in March. (rei)