IMF's review to focus on three major issues

JAKARTA (JP): The International Monetary Fund (IMF) Director for Asia and Pacific Affairs Hubert Neiss said here yesterday that the fund's review of the Indonesian economic reform program would focus on three major issues this month, including the country's crippled distribution system.

Neiss said the rehabilitation of the banking system and the settlement of private sector debt were also of immediate concern because they had a pivotal role to play in the recovery of Indonesia's economy.

"It is very important that all Indonesian people have access to essential commodities... that means stocks have to be there," Neiss said after a 1.5 hour meeting with President B.J. Habibie at the Bina Graha presidential office which was also attended by Prabhan R. Narvekar, the IMF representative here.

Neiss said they also discussed the additional US$6 billion which was last week added to the original $43 billion IMF bailout package.

Release of $1 billion loan installments will depend upon the results of monthly reviews of the program of reform which Indonesia agreed to in exchange for the assistance. The monthly reviews will continue until the end of this year.

The IMF last week approved the immediate payment of $1 billion, bringing the total funds which it has so far released to Indonesia to $4.9 billion.

The President reiterated his commitment to the IMF program during yesterday's meeting, and promised that he would take all necessary measures to see that reforms were implemented, including in the politically sensitive banking sector, Neiss said.

Indonesia's ailing banks are regarded as one of the most sensitive areas in which reforms must be introduced, and also one of the most difficult.

Massive runs on a number of Indonesian banks and mounting non- performing loans have pushed many banks into technical insolvency.

The Indonesian Bank Restructuring Agency (IBRA) has pledged that by the end of July it will freeze, merge, recapitalize or liquidate the six banks under its control for which audits have been completed.

At least 32 banks are now under the agency's supervision.

Neiss noted that the President had given his full support to whatever measures were necessary to nurse the banking system back to health.

He said the IMF also wanted to ensure that Bank Indonesia stopped giving liquidity support to problematic banks.

The third focus of the review, corporate sector debt, would only be discussed in a preliminary capacity during this visit due to the complexity of the issue, he said.

Indonesian private sector companies owe $64 billion in foreign debt. Debtors and representatives of the Indonesian government reached an agreement with creditors in Frankfurt in June to roll over the debt.

He said domestic banks were also likely to adopt a debt relief plan similar to the Frankfurt agreement.

He said he hoped the Indonesian people would remain patient because the severity of the crisis meant that recovery could take a long time.

"However, if the government is steadfast in implementing this program and if social and political stability is maintained, then there is a good chance that everything will go back to normal and that also includes the rupiah," he added. (prb)