Jakarta on course for IMF terms

IMF chief praises Indonesia’s efforts in restructuring, but cautions that changes need to be balanced.

The International Monetary Fund (IMF) said yesterday that Indonesia was on course to get a second loan instalment by the end of next month.

IMF’s acting head, Mr Stanley Fischer, who is here on a three-day visit to review the progress of economic reform, said that Jakarta had made “a good deal of progress” in meeting several conditions.

He added that the multilateral agency was also encouraged by the favourable Paris Club meeting earlier this month which agreed to reschedule US$5.8 billion (S$9.8 billion) of Indonesia’s official debts.

But the agreement hangs on the IMF board approving its next loan payment of US$400 million to Indonesia by June 5. “I hope if things go on schedule we can do better than that in getting the review to the board,” he said. “If things go well and the conditions are met we could have this done before the end of May.”

Indonesia had originally been due to receive the loan earlier this month. But delays in implementing the reforms led the IMF to put the disbursement on hold and impose a new set of deadlines that the government has been racing to meet.

Mr Fischer said that after meeting yesterday with President Abdurrahman Wahid, he was convinced that the government was pushing ahead to achieve the growth rates of the pre-crisis era.

Describing the economic programme in Indonesia as “ambitious”, he outlined some of the things the government had done so far to get the IMF’s support.

For instance, he noted the sale of US$500 million worth of Astra assets was important in signalling to investors that a major sale could be done in a transparent manner.

But more needed to be done on bank and corporate restructuring, he said.

He also touched on the need for decentralising economic and political power to the provinces and districts in the sprawling archipelago. But he cautioned that this had to be done in a balanced fashion.

“This is clearly an important part of democratisation,” he stressed. “But what is important is to make sure it is done in a way that does not lead to the central government losing revenue but not losing any of its spending responsibilities.”

He disclosed yesterday that the IMF was still discussing Jakarta’s request to change the upcoming disbursement into a standby loan that would be drawn only when needed.

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