Fri, 02 May 2003

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.