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)