New LoI hailed by economists, analysts
JAKARTA (JP): Economists and analysts hailed the new Letter of Intent (LoI) signed on Monday by the Indonesian government for the International Monetary Fund (IMF), saying the targets outlined in the agreement are rational and attainable.
"All economic reform targets stipulated in the Letter of Intent are achievable," said economist Pande Raja Silalahi of the Center for Strategic and International Studies (CSIS).
"With the current economic team, plus high expectation and optimism, economic targets mentioned in the Letter of Intent can be achieved," said economist Sri Adiningsih of the Yogyakarta- based Gadjah Mada University.
After days of intense discussions, Indonesia agreed on Monday to sign an LoI for the IMF, detailing economic reforms to be carried out by Indonesia in exchange for financial assistance from the agency.
The new LoI reveals that the IMF is easing some economic reform targets in apparent deference to President Megawati Soekarnoputri's request that donor countries show lenience toward Indonesia.
According to Pande, the signing of the LoI already constitutes a concession being made for Indonesia.
"With the signing of the Letter of Intent, we can now knock on the doors of the IMF, World Bank, Consultative Group on Indonesia (CGI) and Paris Group for financial assistance and debt rescheduling," Pande said.
Adiningsih, however, expressed doubt that Megawati's administration would implement the agreements seriously.
"Indonesia is very good on paper, where in fact the most important thing is the implementation of agreements outlined in the LoI," she said.
"If the Letter of Intent is implemented to the fullest, I'm sure Indonesia's economy will be on track to face future challenges," Adiningsih added.
"We need to prove that we are implementing the economic reforms seriously," Pande said.
Megawati, according to Adiningsih, has several advantages in implementing the economic reforms, including strong support from politicians in the House of Representatives (DPR), as well as from international lending institutions and foreign governments.
Market analyst David Chang also welcomed the LoI and said that, in the long run, the LoI would provide a positive boost to attracting foreign investors who, according to him, look out for deals in the late third and early fourth quarter of the year.
"The targets are more achievable," said Chang, who is also president of PT Vickers Ballas Tamara.
However, he cautioned that, in the short term, the new LoI would have little impact on the financial market.
The rupiah closed trading weaker at Rp 8,740 against the U.S. dollar on Monday, compared to Rp 8,730 at Friday's closing. Dealers attributed the drop to continued high corporate dollar demand for the payment of foreign debts.
Share prices on the Jakarta Stock Exchange ended mixed on Monday in thin trade, but late buying boosted the JSX Composite Index. The index ended up 0.088 point at 441.307. (03)