Prijadi sees no big problems affecting IMF review

JAKARTA (JP): The government could not see any major problems affecting talks with the visiting International Monetary Fund (IMF) mission scheduled to start on Wednesday, Minister of Finance Prijadi Praptosuhardjo said on Tuesday.

The finance minister said that the government had basically met all requirements demanded by the IMF.

"I don't see any big problems ... because the requirements have been fulfilled," he told reporters.

The long-awaited visit by the IMF mission is expected to pave the way for the disbursement of a crucial US$400 million loan tranche to the country, which has been suspended since late last year.

The mission, led by IMF deputy director for the Asia Pacific region, Anoop Singh, arrived in Jakarta late on Tuesday.

Noted economist Sri Mulyani said that the IMF review team's visit would bring the country closer to disbursement of the IMF loan.

Sri said that the IMF would not send its mission if a considerable chance of failure in reaching a new agreement with the government existed. "So far, the signs are quite optimistic," she said.

The IMF canceled in December the disbursement of its fourth $400 million loan tranche, part of a $5 billion loan pledged to the current administration by the IMF early last year, due to signs that the government's commitment to key economic reforms were wavering, including delays in the sale of government-owned shares in the publicly-listed Bank Central Asia (BCA) and Bank Niaga.

The IMF had also expressed concern over implementation of the new fiscal decentralization policy and the government-proposed bill for amendment of the central bank law, accused of jeopardizing the independence of Bank Indonesia.

The government is now determined to complete the divestment of its shares in BCA and Bank Niaga during the first semester of this year.

The government has also issued a decree temporarily banning provincial and district administrations from taking out loans.

The independent panel of domestic and international experts, jointly set up by the IMF and the government to review the proposed bill amending the central bank law, also recently completed its work.

Delay in disbursement of the IMF loan tranche has partly contributed to a sharp drop in the rupiah's exchange rate against the U.S. dollar, which dived to a 30-month low of around Rp 11,500 per U.S. dollar last month.

Bank Indonesia Governor Sjahril Sabirin said last week that the IMF visit would help create positive sentiment for the ailing rupiah.

The local currency strengthened to around Rp 10,638 per dollar late on Tuesday, compared to Rp 10,820 the day before, ahead of the IMF visit.

Meanwhile, Coordinating Minister for the Economy Rizal Ramli said on Tuesday that the IMF mission's length of stay here had not been decided.

Normally, the mission would stay for about two weeks to review implementation of the country's economic reform program and to assist the government draft a new letter of intent (LoI), which stipulates economic and reform targets.

The mission would then return to Washington to present the results of its review work here to the IMF board before the latter approves the loan disbursement.

Rizal said that talks with the IMF mission would first focus on reviewing the implementation of various economic reform programs agreed with them last year.

He said that they would then discuss the country's current economic situation.

Finally, the group would decide on programs to be implemented in the future, he added.

Rizal said that the government had undertaken implementation of the various programs outlined under the last LoI, signed with the IMF in September.

He said that amendment of the central bank law was not part of the LoI.(rei/03)