Indonesia envoy sees IMF mission in RI by March

Indonesia envoy sees IMF mission in RI by March

WASHINGTON (Reuters): Indonesia's differences with the International Monetary Fund are narrowing and significant progress over a stalled US$400 million loan could be seen by the middle of March, Jakarta's envoy to the United States said on Friday.

Ambassador Dorodjatun Kuntjoro-Jakti told Reuters in an interview he was confident the two sides would reach an agreement.

"What we see is narrowing differences. The message has to be discussed in Indonesia in the cabinet... and worked out by our team here," Kuntjoro-Jakti said.

"And of course after an exchange of letters I hope probably -- by the latest probably the middle of March -- we will see the return of a team to Jakarta. And after that maybe will be a disbursement, I hope, in the weeks after that," he said.

The crucial loan, part of a $5 billion facility, has been delayed since December while negotiations between Jakarta and the world lending body dragged on, stumbling over such key issues as the independence of the central bank, local government borrowing and transparency in asset sales.

Progress in these talks is needed for the IMF to be able to announce a date for a mission to Jakarta -- the next step in freeing up the funds.

This is the third time in the past year the IMF has delayed loans from the three-year program as Indonesia struggles with its economic reforms and a series of political crises including the latest violence in Borneo in which nearly 500 people have been killed.

Without IMF backing, Indonesia will have trouble with its key donors -- like the Paris Club of creditors and the Consultative Group for Indonesia -- and confidence in the economy would further erode.

The delay comes at a crucial time for Indonesia's first democratically elected President Abdurrahman Wahid, who faces criticism for traveling abroad despite all his country's problems and mounting political pressure after parliament formally censured him for his role in two financial scandals.

Although the IMF was hailed as a hero when it helped Indonesia after the economy collapsed in 1997, it is now often labeled meddlesome in Jakarta.

Coordinating Minister for the Economy Rizal Ramli, who recently came to Washington for talks with the IMF that yielded little, recently accused it being too pushy.

Kuntjoro-Jakti, a U.S.-trained economist who has had broad involvement in Indonesia's regional and commercial agreements, was supportive of the process, however.

"For me this is a blessing in disguise that we have this problem now, rather than later," he said.

"Yes, it caused a delay from December already to March now probably, but if it is part of the learning curve ... why not? For me any maneuver, if it's based on trust, really hinges on the fact that both honor the international agreement."

The problems being discussed with the IMF were the inevitable consequences of greater democracy, Kuntjoro-Jakti suggested.

The newly-empowered parliament should be blamed for the slowness in asset sales while the limited power of regional governments to borrow was the price Indonesia had to pay for decentralization, he said.

On the independence of the central bank, he said Indonesian officials and the IMF did not disagree.

"I hope that the understanding is now that some of the issues will not be treated as issues that need to be geared to a time schedule... This is a give and take situation as I see it and is now beginning to be understood by everybody involved," he said.

Kuntjoro-Jakti said he looked forward to U.S. involvement in negotiations not only connected with the IMF but also the World Bank, the Asian Development Bank and the World Trade Organization, but added it was early days yet for the new administration of President George W. Bush.

"So far we haven't seen anybody yet," he said.