IMF's chief criticizes RI banking reforms
IMF's chief criticizes RI banking reforms
JAKARTA (JP): The International Monetary Fund's First Deputy
Managing Director Stanley Fischer on Tuesday criticized Indonesia
for what he called a lack of clarity in reporting on its banking
reforms.
Fischer made the statement in Tokyo when asked by the Dow
Jones Newswires why the IMF delayed the signing of a new letter
of intent with the Indonesian government.
"This (the issue of clarity) is certainly something that we
thought would have been worked out by now," he said.
Fischer added that he hoped more delays would not occur, but
stressed that "decisions had to be made" by the Indonesian
government.
In a move that shocked analysts and even senior monetary
officials, President B.J. Habibie ordered an eleventh hour delay
of the massive bank closures last Friday for technical reasons,
saying the closures would be suspended for at least two weeks.
In a related development, Bank Indonesia hinted in Jakarta on
Tuesday that bank interest rates would remain high until the
government-sponsored bank recapitalization program was completed.
The central bank's director, Miranda S. Goeltom, said pending
the successful completion of the recapitalization program,
interest rates likely would stay at their current level or even
rise slightly.
Bank Indonesia's benchmark interest rate is now 37.2 percent a
year for a one month paper.
"I don't expect any significant decrease in interest rates
within the near future," she said on the sidelines of
deliberations on the central bank bill by the House of
Representatives.
However, Miranda does not foresee any sizable rise in interest
rates because the central bank's benchmark interest rate, which
has of late varied between 35 percent and 37 percent, has been
moving in an increasingly narrow range.
"The curve is getting flatter," she said.
She warned, however, that the two-week delay of the bank
closures had caused uncertainty in the banking sector and the
interbank market.
"The delay has inflicted more pain to problem banks already
drained of liquidity by massive withdrawals by depositors," she
said.
It has become even more difficult for liquidity-strapped banks
to obtain funds in the interbank money market because banks with
excess funds do not want to risk lending to insolvent banks, she
added.
The market is currently very segmented. Liquid banks refrain
from lending to insolvent ones out of fear that their funds will
be lost when the bank closures finally are announced in the
middle of this month, she said.
Liquid banks prefer to place their funds in Bank Indonesia's
short-term promissory notes to avoid any risks, she said.
"So the sooner the recapitalization process starts, the sooner
banks will resume normal operations and interest rates will
decrease," Miranda said.(das)