IMF to send its mission to Jakarta this week

IMF to send its mission to Jakarta this week

WASHINGTON (Reuters): The International Monetary Fund said on Monday it will send a high level mission to Jakarta this week, the first move toward ending a six-month deadlock over a US$5 billion loan program.

"The International Monetary Fund will send a review mission to Jakarta later this week to discuss the third review under the $5 billion (loan) program," IMF spokesman Vasuki Shastry said in a brief statement.

"The mission will seek to develop a letter of intent that carries forward the economic program," he added.

In a related development, Indonesian President Abdurrahman Wahid criticized the IMF over its objections to central bank law revisions on Tuesday, ahead of a key IMF visit to Jakarta, saying the IMF should not get involved in microeconomic issues.

Abdurrahman told state-owned TVRI interviewers in Jakarta the IMF was "too rigid" in its response to the proposed central bank law changes.

The central bank law revisions have become the most contentious issue between Indonesia and the Fund and will be the key to ending the six-month stalemate.

The IMF's strongest objection relates to Article 75 which stipulates the entire central bank board be replaced when the new laws come into effect.

Wahid added the Fund should keep not get involved in microeconomic issues.

"Let business circles decide on the microeconomy," he said.

Earlier, Indonesian chief economics minister Burhanuddin Abdullah said he believed the mission would arrive on Thursday.

The IMF team will pave the way for a $400 million loan delayed since December -- more critical to show foreign investors Indonesia's economic reforms are back on track than for bolstering the country's reserves.

Donors would also be heartened by the move and the World Bank has said it could more than double its annual aid program to $1 billion if the impasse was broken.

The team of around 10 officials would be led by IMF Asia- Pacific deputy director Anoop Singh, and follows indications Indonesia will revise central bank law amendments -- the issue which drove relations between the two to rock bottom.

The contentious issue is Article 75 which stipulates the entire bank board be replaced when the new laws come into effect.

The Fund believes such a clause would threaten the bank's hard-won independence. An independent report in April also said the article was a "serious mistake."

Minister Abdullah has said Jakarta would be willing to revise the amendments and might delay a parliamentary debate on the changes.

IMF senior representative in Jakarta John Dodsworth said Indonesia's recent efforts on the central bank law reforms were likely to appease the IMF executive.

"Basically he (Abdullah) has offered, from the government's side, a compromise that should be acceptable," he said.

The Fund's last mission to Jakarta in April ended on a sober note and with a warning the budget deficit could blow out to six percent of GDP and that the country's economic recovery was at risk.

But Indonesia has since made inroads on its 2001 budget which it recently revised, keeping the deficit at 3.7 percent of GDP.

Dodsworth also said the Fund was not overly concerned by a delay in the strategic stake sale of the country's largest retail bank, Bank Central Asia (BCA).

Indonesia's broken promise to sell a stake in BCA by December last year was partly the reason the IMF withheld the $400 million loan.

"They've gone through to the point of getting bids and I expect there will be an announcement on those bids soon," he said.

Indonesia's bank restructuring agency (IBRA), which owns 70.3 percent of BCA, said on Friday it needed more time to evaluate bids for the maximum 30 percent stake sale.

The powerful agency was to have announced the winning bid last week as part of efforts to raise desperately needed cash and to re-energize the government's sluggish privatization program. Five bidders have been shortlisted for the stake.

In addition to the up to 30 percent stake sale, BCA said on Monday it was offering a 10 percent stake at 900 rupiah per share to the public from July 4-6.