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Indonesia sees no hitch on IMF review

Indonesian President Abdurahman Wahid
Indonesia said it has met conditions set by the IMF to pave the way for the release of funds for the country.  

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More work to be done

Corporate debt restructuring

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JAKARTA, Indonesia -- Indonesia is confident no significant problem will affect a long-delayed review by the International Monetary Fund slated to start on Wednesday.

Indonesia's Finance Minister Prijadi Praptosuhardjo said he was confident his country had met all the Fund's key requirements to qualify for a loan.

The Fund suspended the disbursement of US$400 million last December, because of disputes with President Abdurrahman Wahid's government.

The agency is frustrated with the pace of economic reforms, which stalled since last year.

The $400-million loan has far-reaching implications for Indonesia, because it is needed to trigger part of a $5.8-billion debt rescheduling deal agreed last year with the Paris Club of official creditors.

More work to be done

But IMF representative John Dodsworth said there were still many issues the Indonesian government had to tackle.

"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 ailing rupiah was trapped in a tight 10,775-10,800 range against the dollar in late trade on Tuesday ahead of the review.

The IMF wants to see Indonesia prevent its newly autonomous regions from borrowing directly from overseas, and adding to the country's already massive pile of debt.

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.

Corporate debt restructuring

The Fund also wants Indonesia to establish a set of principles for corporate debt restructuring.

The move is seen as vital to Indonesia's chances of finally bringing its economy back to levels seen during high-growth years before the Asian financial crisis erupted in 1997.

Last week, the Indonesian government announced it had adopted an IMF- recommended debt-restructuring program 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.

Reuters contributed to this report.

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