Indonesia will consult IMF on recapitalization
JAKARTA (JP): The government will seek the International Monetary Fund's (IMF) backing before the disputed bank restructuring program begins, Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita said on Tuesday.
"We need all the international support we can to get this program to work," he said after attending a limited Cabinet meeting on economy, finance and industry.
He said he invited the IMF director for Asia Pacific, Hubert Neiss, to consult on the program to recapitalize ailing banks and close insolvent ones.
Neiss arrived here on Tuesday afternoon and is scheduled to stay in the country through Monday.
"The recapitalization program gets financial assistance from the IMF, the World Bank and the Asian Development Bank. So I figure, why don't we invite the IMF's top executive," Ginandjar said.
He recalled the negative international response to the government's move in late 1997 to close 16 ailing private banks.
"When one of the closed banks, Bank Andromeda, was reopened as Bank Alfa, the international community condemned the move and the rupiah collapsed." Andromeda was owned by former president Soeharto's son Bambang Trihatmodjo.
Ginandjar said Neiss would also help the government review the new letter of intent which must be approved by the fund before it could disburse its next loan package.
The IMF, which pledged to broker a US$43 million loan package to help Indonesia cope with its worst crisis in recent history, reviewed the country's economic reform program last month and initially planned to approve the letter of intent at the end of February.
It delayed the signing due to the government's decision to postpone the recapitalization program.
A scheduled Feb. 27 disclosure of the names of banks to be recapitalized and ones to be liquidated was postponed unexpectedly to this weekend.
The move aroused suspicions the government was pressured by bankers with strong political backing at the last minute.
The postponement also prompted senior IMF officials, including Neiss and first deputy managing director Stanley Fischer, to express disappointment.
They urged the government to speed up bank restructuring.
Fischer criticized Indonesia for what he called a lack of clarity in reporting on its banking reforms.
The government defended its decision by saying it was designed to ensure a fair, transparent and accountable decision.
It said it was giving banks the chance to revise their business plans and raise fresh funding to meet the recapitalization requirement.
The government will fund 80 percent needed to recapitalize private banks with a capital adequacy ratio (CAR) of between minus 25 and plus 4, while banks owners have to finance the remaining 20 percent.
CAR is the ratio of equity capital to average-weighted assets.
Banks with CAR lower than minus 25 will be closed down. (das)