RI almost certain to part with IMF this year

RI almost certain to part with IMF this year

Fitri Wulandari, The Jakarta Post, Jakarta

The Indonesian government is almost certain not to extend its
contract with the International Monetary Fund (IMF), which will
terminate at the end of this year.

Aside from forming a team to review the most suitable exit
strategy, the government has also set a team tasked with
reviewing policies to be applied after the program ends.

On Thursday, both teams conducted closed-door meetings with
various parties to draw up the most suitable policies for the
government.

The exit strategy team, headed by Anggito Abimanyu, met with
representatives of the Indonesian Chamber of Commerce and
Industry (Kadin) and a number of business associations.

Sources said that the meeting discussed the future of tax
reforms, when the IMF was no longer in charge of its supervision.
Kadin, the sources said, wanted to make sure that the tax reforms
would not place additional burdens on businesses.

At present, the exit strategy team has yet to come up with
options on how to part ways with the IMF, but there are several
available alternatives.

Meanwhile, the policy review team, headed by State Minister of
State Enterprises Laksamana Sukardi, met with Japanese economists
to discuss recommendations on how to improve the country's
macroeconomic conditions in a post-IMF era. The Indonesian-
Japanese think tank is known as the Joint Indonesian-Japanese
Cooperation Team.

Economist Sri Adiningsih, a team member, said the
recommendations from the team had been presented to President
Megawati Soekarnoputri on the same day.

"The recommendations cover the problems that might lie ahead
and what measures should be taken, as well as the preparations
that should be made after the IMF era," Adiningsih told The
Jakarta Post after the meeting.

Other members of the Indonesian team include economist Sri
Mulyani Indrawati, education expert and legislator Mochtar
Buchori and legislator Herry Ahmady -- the latter two are both
from the Indonesian Democratic Party of Struggle.

The Japan team, led by Shujiro Urata, a professor at Waseda
University, comprises of professors from Japan's noted
universities and experts from economic and trade policy
institutions.

Also present at Thursday's meeting were Indonesian Bank
Restructuring Agency (IBRA) chairman Syarifuddin Temenggung,
Indonesian Ambassador to Japan Abdul Irsan, and officials from
the Japanese Embassy and the Japanese International Cooperation
Agency (JICA).

One official, who spoke on condition of anonymity, said the
recommendations basically covered strategies on how to deal with
state financial issues as well as the confidence crisis among
foreign creditors that would possibly arise, as most creditors
currently rely on the IMF to gauge Indonesia's credit-worthiness.

To maintain foreign creditors' confidence in the government,
the joint Indonesian-Japanese team of experts recommended that
the government "make the most use of" the Consultative Group for
Indonesia (CGI).

The CGI may serve as a platform for the government and its
international counterparts to discuss various macroeconomic
policies and their applications.

Further, the team also suggested that the government continue
with the structural reform programs as outlined in the
government's letters of intent (LoIs) to the IMF.

On how to boost revenues, the team suggested the government
launch a tax reform by focusing not on a higher tax rate, but a
higher revenue yield and by creating a more balanced burden for
all taxpayers.

According to the team, the government needed to increase the
state budget revenue by up to 2 percent in Gross Domestic Product
(GDP) to fund important expenditures.

To cover the possible budget deficit, the team also suggested
that the government borrow from the domestic market by issuing
bonds.

More and more investors have recently invested in government
bonds, in addition to the central bank's promissory notes (SBI),
as both tools are considered safe.

As of December last year, the country's domestic debts stood
at Rp 650.4 trillion (US$72 billion) -- all in the form of
government bonds to salvage domestic banks, with a large chunk of
them due to mature between 2004 and 2009.