Rizal says new LoI with IMF to be signed on Thursday

Rizal says new LoI with IMF to be signed on Thursday

JAKARTA (JP): Coordinating Minister for Economic Affairs Rizal
Ramli said on Sunday that the government and the International
Monetary Fund (IMF) would simultaneously sign a new letter of
intent (LoI) on Thursday.

Rizal said that the IMF board of directors was expected to
meet two weeks from now to give its approval on the new LoI which
would be followed by the disbursement of the IMF's next loan
tranche.

"The (new) LoI is expected to be signed on Thursday," Rizal
said during a press conference.

Rizal declined to provide details of the new LoI arguing that
the IMF deputy managing director Stanley Fisher had yet to read
it.

But he said that the new LoI, apart from a few changes, was
basically the same as the one agreed on by the IMF and the
previous economic team at the end of July.

The LoI contains a set of economic reform programs to be
implemented by the government within a certain period of time.

Several government officials have earlier said that there
would be no major changes in the revised LoI.

The new economic ministers discussed the proposed changes last
week with the IMF Asia Pacific deputy director Anoop Singh and
representatives from the World Bank and the Asian Development
Bank.

Singh arrived in Jakarta on Wednesday after Rizal spoke with
Fisher over the phone earlier on his plans to make some changes
to the previous LoI because "the conditions now have changed
significantly since the last review was made in July."

Rizal had also asked the IMF to delay its board meeting,
initially scheduled for the end of last month, to allow the new
economic team to study the July LoI to increase the government
ownership of the program.

The plans to make a revision in the LoI had created some
jitters in the financial market particularly because of Rizal's
criticism in the past against the IMF.

But Rizal stressed that the new economic team would remain
committed to the IMF-sponsored economic reform program.

The IMF pledged in January to provide the administration of
President Abdurrahman Wahid some US$5 billion in bailout loan to
help finance the country's three-year economic reform program.

The Fund has so far disbursed some $700 million, and it is
expected to disburse another $400 million after the new LoI has
been approved by the IMF board of directors.

Rizal said that the loan disbursement was very important
because it signified the IMF support to the country which was
crucial to help revive investor confidence in the economy.

"Our balance of payments is strong, export is strong. So it's
not about the money," he said.

"The government of Indonesia needs the support of multilateral
institutions like the IMF, the World Bank and the Asian
Development Bank to accelerate the economic recovery," he said.

Rizal reiterated that although the current economic team was
new, it was a solid team "with no non-sense approach and has a
high commitment to the efforts to accelerate economic recovery
and to implement the agreed (economic) target."

He also said that the IMF was very impressed and fully
supported the proposal made by the new economic team, and
expected the government to be able to immediately implement the
program.

Separately, Singh confirmed that the Fund and the government
had agreed to revise the previous LoI.

"There will be full continuity of the macroeconomic policy
framework and there will be full continuity of structural aspects
of the program," Singh was quoted as saying by Reuters.

"They reaffirmed the importance of banking sector reforms, and
they reaffirmed the importance in the program of corporate debt
restructuring."

Singh said the $400 million loan would only be disbursed after
the IMF executive board had approved the revised LoI, adding that
the Fund would try to avoid any delay.

"Next week we expect the revised letter will go to the
executive board and it will be released simultaneously in
Jakarta," he said.

"But only after the executive board has approved it will the
money become available...we're trying to move very fast."

Singh declined to provide details of the revised LoI.

Singh was optimistic that Indonesia would move beyond its
current consumption-based growth if investors regained confidence
in the country.

"For that you need to gain full market confidence, you need to
convince investors they should stop watching and waiting and you
need capital flows to return to Indonesia."

"With persistent implementation of the program we will achieve
that, there is no doubt."

Singh also expressed confidence Indonesia would achieve three
to four percent economic growth this year but warned of
inflationary pressures next year.

"On inflation we have to be very careful," Singh said.

But he said double digit inflation was an "unlikely prospect"
in 2001.

The government expects inflation this year to be more than 8
percent compared to the initial forecast of 5-7 percent due to
the planned fuel price increase in October.(rei)