New IMF accord expected to be signed this week

New IMF accord expected to be signed this week

JAKARTA (JP): A new letter of intent between Indonesia and the
International Monetary Fund (IMF) is expected to be signed this
week, Coordinating Minister of Economy, Finance and Industry
Ginandjar Kartasasmita said yesterday.

He said the agreement would allow for the quick disbursement
of the IMF's additional bailout money for Indonesia, which was
delayed following last month's political unrest.

IMF deputy managing director Stanley Fischer said earlier in
Brazil that the loan disbursement to Indonesia could resume on
July 6.

The IMF has pledged to provide US$10 billion to Indonesia in a
balance of payments loan, which is part of a $43 billion bailout
pledged by multilateral agencies and government donors last
November.

The IMF has disbursed $4 billion to date, and is planning to
disburse another $1 billion next month after a team headed by IMF
Asia-Pacific director Hubert Neiss completes reviewing the
country's economic reform programs.

The disbursement of the IMF loan will be key to the unlocking
of overseas aid and to the revival of market confidence in the
economy, which has been mired in its worst economic crisis in
three decades.

Ginandjar said the government would not opt to reschedule its
foreign debts if other options were available, including the help
of international institutions.

Many economists have suggested Indonesia consider rescheduling
the repayment and servicing of its $54 billion in sovereign debts
amid the government's severe liquidity crisis. But others say
that such a decision would further diminish international
confidence in the government.

"We realize that without international help our stabilization
program will not succeed," Ginandjar said. "I have assurances
from the United States that they will help Indonesia overcome its
problems."

He was speaking after a meeting with U.S. Deputy Treasury
Secretary Lawrence Summers, who made a one-day visit to Jakarta
yesterday.

A central bank official said the Consultative Group on
Indonesia (CGI), which is scheduled to convene next month, was
expected to agree to the country's proposal to use its aid to
finance social safety net programs.

CGI aid has been traditionally used to finance infrastructure
projects.

Neiss and the government are currently discussing ways to
finance the 1998/1999 state budget, which is being heavily
burdened by various subsidy commitments. (rei)