Wed, 12 Sep 2001

Mixed reactions greet IMF's loan disbursement

JAKARTA (JP): Economists presented mixed reactions on Tuesday to the International Monetary Fund (IMF)'s decision to release a US$400 million loan tranche to the country.

Noted economist Umar Juoro said disbursement of the funds should help revive investor confidence in the economy, while at the same time opening the way for the Paris Club of creditor nations to agree to the rescheduling of the country's $2.8 billion in sovereign debt maturing this year and in 2002.

"Indonesia is now gaining momentum for further talks with other lenders such as the Paris Club and the Consultative Group on Indonesia (CGI)," Umar said.

CGI groups Indonesia's traditional donor institutions.

A special government team is currently negotiating with the Paris Club for formal approval for the debt rescheduling facility.

The government is also planning to meet with the CGI donors in November to request new loans that will help finance the 2002 state budget.

"The result of that meeting will be crucial as the government plans to use the loans to finance next year's state budget," Umar said.

Umar warned, however, that the government was still facing several "technical problems", including obtaining approval from the House of Representatives over plans to divest a 51 percent stake in the publicly listed Bank Central Asia, which is part of an economic reform program agreed to with the IMF.

"The real problem would be how to handle technical problems, not to mention the problem we still have regarding the BCA divestment," Umar said.

The IMF suspended the $400 million loan disbursement late last year after legislators rejected the plan to sell BCA.

Separately, economist Didiek J. Rachbini said that he did not see the significance of the loan disbursement, adding that it was not what Indonesia really needed.

"What can we do with this $400 million? The costs we have had to bear since late last year as a result of the loan postponement have been countless," he told The Jakarta Post.

"And I am not just speaking in monetary terms. As well as the negative sentiment (toward Indonesia), social and political effects were a consequence of the delay.

"I am talking about people here. I am beginning to see that the IMF is not the right answer for Indonesia's problems. We need to find a new solution to put the country's economy on the right track," Didiek said.

"It's been four years since they first came in and look what they've done. They've dragged us into much deeper problems," he added.

Suspension of the IMF loan late last year sent the rupiah tumbling. Instability in the financial market caused various additional economic problems and to a certain extent contributed to the downfall of former president Abdurrahman Wahid.

The $400 million loan is part of the IMF's $5 billion loan agreed to in early 2000 to help finance a three-year economic reform program.

Meanwhile, legislator Paskah Suzetta warned the government against getting carried away with the IMF loan disbursement.

Paskah Suzetta hailed the loan disbursement as "a good achievement" for the government, but warned that follow-up measures had to be taken to further boost investor confidence.

"It's a good step, but it has to be followed by other initiatives by the government in order to meet requirements stated in the Letter of Intent signed with the IMF," Paskah said.(03/10)