Indonesia will consult IMF on recapitalization
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)