Jakarta – Indonesia's economic growth this year should easily meet official forecasts of between three and four percent, the government said in the latest revised letter of intent to the International Monetary Fund (IMF).
"We now expect 2000 growth to be at the top end of the targeted three to four percent range," the government said in a draft copy of the review obtained on Tuesday by AFX-Asia, an AFP financial news subsidiary.
"End-period inflation should be well within the targeted five to six percent range," the review said, adding that the scenario was supported by figures for the final quarter of 1999, when economic growth reached 5.8 percent.
The review, which is scheduled to go before the IMF board May 31 for approval before a delayed tranche of 400 million dollars in bail-out funds can be released, said the economic recovery has been sustained in the first quarter of this year.
The review noted that parliament had approved a total increase of 30 percent in the base wages of civil servants, but that final agreement was reached only on an initial increase of 15 percent, which was implemented on April 1.
In other budgetary matters, the review said the government also agreed with parliament that cash recovery from the Indonesian Bank Restructuring Agency (IBRA) and privatisation targets should total 25.4 trillion rupiahbillion dollars) for the year. "On this basis, foreign financing of the fiscal year 2000 budget is expected to be 18.7 trillion rupiah (2.0 percent of GDP)," it said.
The review also said IBRA and Bank Indonesia would publish audits of their 1999 accounts by end-June, and that the government hopes to finish interim recommendations by the end of this month on a new governance and oversight framework for IBRA. "A new governance framework for IBRA, including an independent governing body, will be established by end-June," the review said.
In another pledge it said that the government will finalise regulations on its new telecommunications law by June, and set up an inter-ministerial team to oversee the restructuring and privatisation of the sector.
"This team will be responsible for preparing a detailed and comprehensive action plan by June 2000," the review said. It also said PT Telekomunikasi Indonesia (Telkom) and PT Indonesian Satellite Corporation (Indosat) have been told to rationalise their holdings in other telecommunications enterprises and divest stakes in non-core businesses this year to prepare for the opening of the sector.
"We remain firmly committed to transforming the telecommunications sector into a fully competitive business environment," the review said.
Answering concerns on decentralization, it said the central government will seek to place firm restrictions on borrowings by provincial and local governments as part of laws covering decentralisation.
"Specific mechanisms will be developed to ensure that any borrowing by sub-national governments is kept within strict limits," the document said.
IBRA, it said, will seek to complete restructuring terms of 35 percent of the loans of its largest debtors by June, and is concentrating on the 21 largest debtors, who account for 36 percent or 12.4 billion dollars of the agency's loans.
IBRA is charged with rebuilding the country's banking sector shattered by the financial crisis which started in mid-1997. The slow loan and corporate restructuring process is one of the reasons often cited for Indonesia's slow economic recovery.