Kwik upbeat government will meet IMF deadline

JAKARTA (JP): The government said on Wednesday it was optimistic it would meet the deadline set by the International Monetary Fund (IMF) to complete key economic reform programs.

Coordinating Minister for the Economy, Finance and Industry Kwik Kian Gie said the government was currently working hard to meet the deadline so that the letter of Intent (LoI) could be signed with the IMF as scheduled on July 20.

"Yes, I am optimistic," he told reporters in reference to meeting IMF's deadline.

Kwik was commenting on a statement made by the secretary of the National Economic Council (DEN) Sri Mulyani, who warned that the government might fail again to sign the upcoming LOI on time.

Sri said that it would be difficult to achieve scheduled obligations, given the various challenges and complexities.

Kwik had no objection against such doubts, and called them reasonable.

The LoI contains the government's economic reform programs and the deadlines for their implementation.

Complying with the LoI is prerequisite to obtain the IMF loan package -- a total of US$5 billion to finance the country's economic recovery.

The government failed to meet reform deadlines in April as specified in the LoI agreement signed with the IMF in January, causing a delay in the second disbursement of US$400 million.

The government managed to sign the second LoI in May, after which it obtained the funds.

Another failure to meet the implementation schedule of the LoI might lead to a delay of the third loan tranche, which is set for August.

According to Sri, some of the 53 items in the May LoI were difficult to be realized by the deadline.

She cited for example the slow handling of uncooperative debtors that she blamed on lack of coordination between economic ministers and officials of the Indonesian Bank Restructuring Agency (IBRA).

IBRA was established to restructure and recover non performing loans amounting to Rp 220 trillion ($23.6 billion) from the country's banking sector.

Under the LoI, IBRA's priority is the restructuring of its top 21 debtors, which owe a combined debt of Rp 87.35 trillion, 35% of the non performing loans.

The May LoI requires IBRA to finalize by June the restructuring of terms for those 21 debtors or initiation of legal action against uncooperative debtors.

IBRA said recently that some 28.45 percent of the total debt has been restructured, and promised to continue the litigation process against uncooperative debtors with obligations of 7.02 percent of the loans.

However, Sri has said that it will be difficult to handle uncooperative debtors without the full cooperation of the judiciary.(bkm)