IMF waiting for amendment of central bank law

IMF waiting for amendment of central bank law

JAKARTA (JP): The International Monetary Fund (IMF) will
disburse its next loan tranche to Indonesia only after the House
of Representatives completes a crucial amendment of the central
bank law, Minister of Finance Prijadi Praptosuhardjo said on
Tuesday.

Prijadi said a credible central bank law was crucial to
maintain investor and market confidence in the economy.

"They (the IMF) want to see the amendment completed first," he
said on the sidelines of a gathering to mark the breaking of the
fast with journalists at his house.

Prijadi added that the IMF was ready to provide its expertise
and knowledge about central bank legislation if the House wanted
some input.

The IMF was supposed to disburse a US$400 million loan to the
country at the end of this month, but it decided last week to
delay it until February or March next year. There was no
explanation from the fund.

The fund promised in January this year to provide a $5 billion
loan to the administration of President Abdurrahman Wahid to help
finance the country's three-year economic reform program.

The House is deliberating government-proposed amendments to
the central bank law.

Critics have said the amendments were aimed mainly at
making it easier for the government to meddle with Bank
Indonesia, including replacing its board of governors, especially
incumbent governor Sjahril Sabirin, who has fallen out of
President Abdurrahman's favor.

Abdurrahman has been calling on Sjahril to resign since
February.

Coordinating Minister for the Economy Rizal Ramli has,
however, repeatedly argued that the delay in the IMF loan
disbursement had nothing to do with the government's performance
regarding its reform measures.

Rizal instead blamed the delay on technical matters related to
a "scheduling" problem or the itineraries of the IMF executive
board in Washington.

Rizal pointed out that discussions between the government and
the IMF review team on the economic reform program could not be
implemented as scheduled due to year-end holidays.

The IMF normally disburses its loan once it has completed a
review of the government economic reform program.

Reports have said the delay in the IMF loan was linked to the
government's failure in implementing key economic programs.

The IMF has been irked by the recent delay in the key sale of
government ownership in Bank Central Asia and Bank Niaga. The
government was supposed to sell the two banks late this year but
it decided to delay until the first quarter of next year.

The IMF has also expressed concern over the risk in the
implementation of the regional autonomy and fiscal
decentralization policy in January 2001.

The IMF has demanded the government to issue a special ruling
to ensure that provinces and regencies do not jump into a
borrowing spree once the autonomy policy is implemented.

Prijadi said the delay in the IMF loan would not seriously
affect the economy because it was basically a second line of
defense for its international reserves and the delay would only
be for a couple of months.

Prijadi stressed the government remained committed to
implementing the various economic reform programs agreed with the
IMF.

He said he had promised the IMF that the government would
accelerate the disposal of various banking assets under the
Indonesian Bank Restructuring Agency (IBRA) and the privatization
of state companies.

Prijadi said eight state-owned enterprises were in the
pipeline for privatization next year to raise Rp 6.5 trillion for
the state budget.

He added that the companies to be privatized included
pharmaceutical companies PT Indo Farma, PT Kimia Farma, surveyor
company firm PT Sucofindo, airport operator PT Angkasa Pura II
and several plantation firms. (rei)