RI reaches agreement with IMF on monthly review

JAKARTA (JP): The government has reached agreement in principle with the International Monetary Fund (IMF) on a new letter of intent which would pave the way for the release of another US$1 billion in bailout funds, a senior minister said.

Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita said on Thursday that the contents of the agreement would be announced on Friday.

The government normally signs a new letter of intent with the IMF after every program review.

IMF Asia-Pacific Director Hubert Neiss is in town to wind up the program review for November.

Neiss told reporters separately on Thursday that Bank Indonesia's foreign exchange monitoring plan could be realized next month.

Ginandjar said the IMF's monthly review of its assistance program was the last one. In the next six months, the Fund would conduct reviews every two months, quarterly thereafter.

At the beginning of the program, the IMF carried out reviews on a quarterly basis. The Fund began conducting monthly reviews in May following the downfall of former President Soeharto.

Finding an effective way to monitor its Indonesia program had been a key concern of the IMF, even before the exit of Soeharto. The fund was repeatedly frustrated by Soeharto's breaching of program commitments while he was in office.

The IMF, which is organizing a multi-billion dollar bailout money for Indonesia, has so far disbursed $7 billion (including $1 billion released this week) out of its commitment to provide a total of $10 billion.

Ginandjar said discussions with the IMF focused on bank and corporate restructuring, easing monetary policy and controlling inflation. "The implementation of all policies announced before this has been reviewed. On the macroeconomic front, efforts were discussed to expedite interest rates cuts,"

Bank Indonesia Governor Sjahril Sabirin said separately that benchmark interest rates of its one-month promissory notes (SBIs) would drop to 40 percent in the coming weeks provided that the rupiah continues to improve and inflation is under control.

Earlier this week, the governor said interest rates could reach the 40 percent level by year-end.

Interest rates on one-month SBIs fell to 51.16 percent at this week's auction from 53.66 percent last week and over 70 percent in September.

The rupiah, meanwhile, strengthened dramatically over recent weeks. It was traded at 7,800 against the dollar on Thursday.

At the current level, the rupiah is 35 percent higher than that in early September but still 68 percent lower than the pre- crisis level of Rp 2,450 per dollar.

Meanwhile, the inflation rate has also slowed down. The consumer price index for the first time fell 0.27 percent in October. Nevertheless, the cumulative inflation rate for the first 10 months of this year was still high at 79.4 percent. (prb/rid)