Paris Club meeting likely to go ahead

JAKARTA (JP): Minister of Finance Prijadi Praptosuhardjo said here on Wednesday that uncertainty regarding the International Monetary Fund's (IMF's) review on Indonesia's economic reform program would not affect the Paris Club meeting.

The minister said that he hoped the international creditors in the Paris Club would go ahead with their meeting in April.

According to the minister, the meeting which would discuss the Indonesian proposal to reschedule part of its sovereign debts is very important to lift the country out of the crisis.

The Paris Club agreed last year to reschedule Indonesia's sovereign debts worth $5.8 billion.

Analysts said that worsening relations between Indonesia and the IMF would have a great impact on the country's credibility in the eyes of the international community.

Without IMF backing, Indonesia will have trouble with its key donors -- like the Paris Club of creditors and the Consultative Group for Indonesia -- and confidence in the economy would further erode.

Indonesian officials told reporters earlier this week that the fund will send a team on Thursday, but were unclear whether the visit would constitute an official mission.

The IMF, however, declined on Wednesday to confirm the visit.

"We have no comment or information on this report," Vasuki Shastry, a spokesman for the IMF, told Dow Jones.

The uncertainty regarding the Fund's review would not only prolong the delay in its loan disbursement to Indonesia but also could affect the meeting of the Paris Club, which has regarded the Fund's review as an important gauge for its future debt facilities.

The IMF has delayed a $400 million tranche of its $5 billion loan to Indonesia since December amid concerns that the country is not moving fast enough on economic reforms.

Indonesia moved to patch up relations with the IMF last week by making progress on some missed economic reform targets within its agreed program.

A major reason behind the delay of funds last year was the government's failure to sell PT Bank Central Asia and PT Bank Niaga, two nationalized institutions, by the deadline at the end of 2000.

The legislature, which had blocked the sales on grounds it would involve selling assets cheaply to foreigners, reversed its position last week.

The government also said last week that provincial governments could only borrow money after central government approval.

New laws which give power to the provinces over revenues and expenditures from this year have drawn criticism from the fund, which is concerned the regions could build up a huge debt, worsening Indonesia's fiscal position.

The IMF is also worried that plans to amend the central bank law, making it easier for the government to fire the governor, could lead to political meddling in monetary policy.

Indonesia has said it plans to push ahead with the amendment, which could still form a major stumbling block with the fund, analysts say.(03)