Rizal says IMF is too pushy

Rizal says IMF is too pushy

JAKARTA (Agencies): Indonesia on Thursday complained that the
leader of its bailout program, the IMF, was pressing it too hard,
saying it was difficult to implement every reform while the
country was going through its unruly transition to democracy.

The International Monetary Fund (IMF) has refused to hand over
more money out of its US$5 billion bailout fund until Jakarta
settles questions of regional government borrowing, attempts to
change the central bank law and sells stakes in two major retail
banks.

"We got that feeling," chief economics minister Rizal Ramli
told foreign reporters, when asked if he believed the IMF was
being too pushy. He added he had already raised the point with
the Fund.

"I told him (IMF deputy managing director Stanley Fischer)
that this is not an authoritarian regime any more," he said in
reference to the long autocratic rule of former president
Soeharto.

His comments came amid the still uncertain date of the third
disbursement of IMF's $400 million loan, originally due last
December.

The government, stumbling through repeated political squabbles
that distract it from the economy, argues that it is doing quite
well given the massive challenge of shifting from decades of
corrupt despotism to a democratic system.

"I'm not happy because the speed (of reform) is not
enough...(but) at least we are on the right track," said Rizal.

He said he hoped the sales of stakes in major banks Bank
Central Asia (BCA) and Bank Niaga would be done by June as the
IMF wants.

But on the issues of borrowing by newly autonomous regions and
the controversial changes Jakarta wants in the central bank law,
Rizal showed little sign of bending to the IMF will.

The changes to the central bank law have been criticized for
being poorly drafted and some have accused President Abdurrahman
Wahid of being motivated more by a desire to settle a personal
score with the governor whom he wants sacked.

Most of the central bank board has already resigned and
governor Sjahril Sabirin, who refuses to step down, is currently
on trial over graft charges. He has denied wrongdoing.

The institution has been at the center of allegations of
massive corruption and Ramli said it needed to be cleaned up
first, forced to be accountable and then handed its independence.
The government wants to sack the whole board.

Rizal also said Jakarta could not ban regional governments
from borrowing. Those comments appear at odds with remarks he
made on Monday, when he said a decree had been issued banning
regions from borrowing from local or international sources.

The IMF fears such borrowings would only plunge the country
deeper into debt at a time when it is already struggling to pay
its creditors.

"I fully understand the IMF's position that local governments
can't borrow," Ramli said.

But he said the law was already in place under a previous
government and that authorities could not simply override that.

"We can't explicitly say local governments can't borrow. We'd
like to amend the law, but not today...(maybe) next year."

In the meantime, the government can insist that any offshore
borrowing has approval of the finance ministry, which has also
warned local banks not to lend to the regions.

Indonesia is also under heavy pressure to end large subsidies
on fuel, which many critics say benefit the wealthy as much as
the impoverished masses they are meant to help.

"I still expect we can do this by early April," Rizal said,
adding the increase had to be implemented because it was already
in this year's budget.

But he called it a question of timing, saying it would be
"suicidal" to go ahead if there were widespread protests.

IBRA oversight

Separately, Rizal rejected on Thursday calls from legislators
to dissolve the Finance Sector Policy Committee (FSPC), and
denied claims that the committee was meddling with the Indonesian
Bank Restructuring Agency's (IBRA) works.

According to Rizal, the FSPC had only interfered in large
restructuring programs involving family members of former
president Soeharto.

Restructuring programs worth more than Rp 1 trillion (about
US$105 million) should have been reported to the FSPC, he said.

According to him, the restructuring programs of Soeharto's
family businesses were worth well over Rp 1 trillion but IBRA
never reported them to FSPC.

"It turned out that IBRA split the programs into smaller ones,
and restructured them separately," Rizal told reporters after
opening a banking symposium on small and medium size enterprises
held by the National Private Banks Association (Perbanas).

He was responding to legislators' criticism that FSPC had
meddled too much in IBRA's work, and thus should be terminated.

FSPC has the final say on major bank and corporate
restructuring programs. Led by Rizal, the committee, formed last
year to ensure good corporate governance at IBRA, groups together
economic ministers.

But legislators called FSPC ineffective, saying that it
intervened too frequently in IBRA.

Legislators fear that FSPC intervention involved
restructuring deals worth less than IBRA's Rp 1 trillion limit.

IBRA is in charge of restructuring debts and the sale of
assets worth over Rp 600 trillion taken over from closed down,
nationalized and recapitalized banks.(bkm)