IMF due to visit Indonesia next week

Indonesian President Abdurahman Wahid has approved a debt-restructuring program imposed by the IMF

JAKARTA, Indonesia -- The International Monetary Fund will be sending a long-awaited mission to Indonesia next week, to review the country's economic progress.

Indonesia is hoping the meeting will turn into more cash from the international lending organization.

Jakarta had been due to receive a US$400 million dollar check from the body late last year, but it was delayed while the two sides battled over key reforms to the damaged economy.

"The mission should start work next Wednesday...all conditions for the mission (to visit) have been met," said IMF Indonesian representative John Dodsworth.

The mission will be led by IMF deputy director for Asia/Pacific Anoop Singh and breaks a long impasse which threatened to cut Indonesia off from desperately needed funds, not only from the IMF but also other major creditors.

It comes as Indonesia continues to lurch through political and economic crises that have plagued it for more than three years, accompanied by mounting poverty and violence.

The tour could also free up part of a $5.8 billion debt rescheduling deal, which was reached last year with the Paris Club of official creditors.

Outstanding issues

The IMF team will work with the government on a new letter of intent which will later be presented to the Fund's executive board which decides whether to hand over more money to Indonesia.

"There are still many issues we still have to tackle," Dodsworth said.

"The fiscal situation has deteriorated a lot and basically the mission will have to find ways to correct (it)...that is the challenge of the mission," he said.

The new loan has been held up by four key factors, that Jakarta's delay in setting a date to sell off two major retail banks.

Another one is that it establishes a set of principles for corporate debt restructuring, one of the keys to Indonesia's chances of finally bringing its economy back to levels seen in high growth years before the Asian financial crisis erupted in 1997.

Indonesia should also block newly autonomous regions from borrowing direct from overseas and adding to the country's already massive pile of debt. And lastly, it should review controversial changes the government planned to make to the central bank law.

Analysts and officials have warned that the budget deficit, already targeted at a hefty 3.7 percent of gross domestic product this year, could rise because of the damaged rupiah. A falling rupiah sharply pushes up the cost of servicing the government's debts and also the huge cost of subsidizing domestic fuel prices, another bone of contention with the IMF.

But Indonesia is adopting a corporate debt-restructuring program recommended to it by the International Monetary Fund (IMF), so the government can recover bad debt.

Jakarta is hoping the program will help it settle about US$40 billion owed to the Indonesian Bank Restructuring Agency (IBRA) by companies that collapsed during the Asian financial crisis from 1997 to 1998.

"The program is designed to promote economically viable restructurings, which are key to sustained economic recovery and reduction in unemployment," IBRA said in a statement on Friday.

Reuters contributed to this report.

Indonesia calls on IMF
February 20, 2001

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