Fri, 23 Feb 2001

Rizal makes little progress in lobbying IMF

JAKARTA (JP): High-level talks between the government and the International Monetary Fund in Washington on Wednesday failed to produce enough progress to break the deadlock that has frozen crucial IMF lending to Indonesia.

Coordinating Minister for the Economy Rizal Ramli met with the IMF first deputy managing director Stanley Fischer, hoping to make sufficient progress on key issues such as the amendment of the central bank law and the fiscal decentralization policy so as to reach an agreement which could lead to the disbursement of the Fund's next US$400 million loan tranche.

But Reuters said that a brief statement from the IMF late on Wednesday appeared to signal that little progress, if any, was made at the talks and another source familiar with the situation indicated the stalemate was still continuing.

"I can confirm that Stanley Fischer met with Minister Ramli this afternoon," was the only light IMF spokesman Vasuki Shastry would shed on the talks.

He also said that no further talks had been scheduled as yet between the IMF and the Indonesian authorities.

Rizal also held talks on Wednesday with U.S. Treasury Secretary Paul O'Neill. But the Treasury Department did not issue any statement on the substance of the talks.

The IMF delayed the disbursement of its latest loan tranche in December last year due to concerns over the government-proposed bill on the amendment of the central bank law, the new fiscal decentralization policy and delays in the sale of the government's stakes in Bank Central Asia (BCA) and Bank Niaga.

The most difficult issue seems to be the amendment of the central bank law, which some say could threaten the independence of Bank Indonesia.

The IMF has said it will only disburse its next loan installment after the amendment of the central bank law has been completed in such a way as to not affect the independence of the central bank.

Separately, Minister of Finance Prijadi Praptosuhardjo said on Thursday that the government would try to lobby the IMF so that the multilateral agency would not link the disbursement of its loan installment to the amendment process.

Prijadi said that the government did not want to hasten the deliberation process of such an important bill in the House of Representatives.

"We expect to reach an understanding with the IMF, and now the Coordinating Minister for the Economy is in Washington (to lobby)," he told reporters following a plenary session of the House.

Prijadi also said that the government had basically fulfilled most of the economic reform pledges contained in the so-called Letter of Intent to the IMF.

"The only part which has not been completed is the sale of Bank BCA and Bank Niaga as this still needs the approval of the House," he said.

The government was supposed to complete the sale of the two banks in December, but this was delayed due to unfavorable market conditions at the time. The government is now planning to complete the divestment program in June, but it must first be approved by the House.

Meanwhile, Speaker of the House of Representatives Akbar Tandjung urged the government to reach an accommodation with the IMF to allow for the disbursement of the Fund's loan so as to support the ailing economy.

"The support of the IMF is very important for influencing those who may be planning to invest here," he told reporters.

The IMF has promised the current administration some $5 billion in bailout loans for three years starting in January, 2000. So far, it has disbursed around $1 billion.

There has been concern that if the government fails to reach an agreement with the IMF by the end of March, the Paris Club of creditor nations could also cancel the restructuring of the country's sovereign debt. (rei)