IMF's review to focus on three major issues

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)