Jakarta – Indonesia should post Gross Domestic Product growth of 1.8% in the year to March 2000, according to a draft of the government's latest letter of intent to the IMF, obtained Friday.

GDP growth during the April to December 2000 transitional budget year was estimated at 3-4%, according to the draft dated November 24, obtained by AFX Asia, an AFP-affiliated financial news service. Economic expansion in 2001 was seen at 4-5% and 5- 6% in 2002.

The draft document is still being discussed by the government and International Monetary Fund negotiators but while some alterations will occur, many of the conditions are not to expected to change significantly, sources familiar with the talks said.

The draft letter sees inflation at 8-9% in the year to March 2000 compared with 64.7% a year earlier. It is expected to rise 3-4% in the April-December 2000 transitional budget. In 2001 and 2002, inflation is seen rising 4-5% per year.

The letter sees interest rates declining further but does not provide details. The letter did not forecast an exchange rate for the rupiah but uses a rate of 7,000 to the dollar in some calculations. The letter sees public debt to GDP at 89.1% in the April-December 2000 transitional budget, compared with 91.7% in the year to March 2000. Bank Indonesia's net foreign exchange reserves are seen at 16.2 billion in 2000, unchanged from late 1999.

The government expects the debt service ratio to be 34.8% in the year to March 2000, compared to 39.1% a year earlier. The ratio will fall to 29.8% in full-year 2000, 27.1% in 2001 and rise to 34.8% in 2002.

The goverment expects an external account surplus in the year to March 2000 of 5 billion dollars or about 3.2% of GDP. This would be 2.5 billion dollars above previous projections because of reduced fiscal expansion and stronger oil export prices, the letter said.

"With the onset of recovery and a strengthened currency, we expect the current account surplus to decline in 2000, consistent with the pattern experienced in other Asian countries," the letter said.

It said the current account surplus should fall to about 1.5 billion dollars in the April-December 2000 budget year. "Export volume growth should strengthen, although this is expected to be outweighed by a recovery of imports, which should still remain well below the pre-crisis level," the letter said.

It said there should be an external financing gap in the April-December 2000 budget year of about 4.3 billion dollars which will be linked to an expected budget deficit of about 5 billion dollars. The budget deficit is seen falling to 3.7 billion dollars in 2001 and 2.6 billion dollars in 2002.

"We have requested another principal rescheduling from the Group of Official Creditor Countries of Indonesia for the 24- month period through March 2002; estimated relief during financial year 2000 is 2.1 billion dollars," the letter said.

The IMF is coordinating a 46 billion dollar aid package to help Indonesia overcome its worst crisis in decades, in return for wide-ranging economic reforms and restructuring.