Release of funds week away: Fisher
Release of funds week away: Fisher
JAKARTA (Dow Jones): A deal between the Indonesian government
and the International Monetary Fund could still be a week away,
the IMF's Deputy Managing Director Stanley Fischer said
yesterday.
But even then, disbursement of a second $3 billion tranche to
Indonesia could take weeks as the Fund will observe a "period of
testing" of Indonesia's commitment to reform before releasing the
funds.
"We need a time between the agreement and the date of
disbursement to make sure that the actions (the Indonesians have
agreed to) have been taken," Fischer said in an interview with
CNBC Asia Business News.
"What the precise date is isn't clear, but there'll be a
period of testing,"
Fischer was in Jakarta to take part in what has turned into a
marathon, three-week long IMF review of Indonesia's reform
program. The review is being done to pave the way for the
releasing of the second tranche, which was postponed last month
over concerns of the slow-pace of reform.
Fischer left here yesterday.
Fischer said that "a lot of progress" has been made in the
review of the five key areas of the reform program, but that
there are "a few remaining points."
The five areas have been grouped into: monetary policy; the
budget and subsidies; banking reform; structural reform; and
resolution of Indonesia's private-sector debt.
Fischer said that resolution of this $68 billion in debt was
particularly "complicated" as it involves negotiations between
Indonesian debtors and their foreign creditors.
He noted that the IMF was putting in place a framework for
debt repayments based on a model used in Mexico in the early
1980's.
Still, he stated, the IMF believed "there had to be progress"
in debt talks scheduled between the lenders and borrowers in the
coming weeks.
Concerning monetary policy, Fischer said that both Indonesia
and the IMF have agreed to implement a "very tight" regime in
order to strengthen the rupiah.
In this area, Indonesia could learn from the examples of
neighboring Thailand in South Korea, Fischer said. Both have been
hit by devaluations in the past 12 months.
"In Thailand and South Korea, we've seen that you can get the
currency to strengthen substantially if you stand firm on
monetary policy. We believe the Indonesians will do that,"
Fischer said.
Fiscal measures have been essentially agreed upon, Fischer
said, though he did not elaborate, and banking reforms have
already started to be enacted.
On Saturday, Indonesia's Finance Ministry announced that
another seven banks had been shut and another seven placed under
the management of a private restructuring agency, as part of a
plan to clean up the system.
Fischer said that a new bankrupcty law will be set up both to
aid banking reform and to resolve the private-sector debt
problem. Lender's fears that Indonesian companies simply will not
pay should be assuaged by an improved ability to seize borrowers'
assets.
"If companies really can't pay, they'll have to go into
bankruptcy and the creditors will take their assets. So there
won't be any easy way out for companies that have assets and
don't pay," Fischer said.
The final area, concerning strucutural reforms, Fischer said
will stick to the terms agreed to under an earlier Jan. 15 pact
between the IMF and Indonesia.