Jakarta – Indonesia promised IMF officials it will direct windfall oil profits towards its staggering debt, accelerate asset sales and move on the privatisation leg of its bank recovery program, officials said Tuesday.
An International Monetary Fund (IMF) team led by deputy Asia director, Anoop Singh, has been here for 11 days to assess progress in the current Letter of Intent (LoI) signed last September.
"We have just started the process of the third review," Singh said after the meeting, adding the third review of the IMF's loan package would not need to be completed until December. "We will continue and sign [the next LoI] next year," Singh said of the letter, a pre-requisite of the next tranche of IMF assistance to Indonesia. "The timetable gives us sufficient flexibility to do [the third review] during the fourth quarter of the year," he added.
Singh has met with Indonesia's economics chief Rizal Ramli and will meet with a team of key economic policy makers, including central bank governor Anwar Nasution and Attorney General Marzuki Darusman. Indonesia "shared the IMF view that current 'windfall gain' from high oil prices should be used prudently including reducing its external debt," an economic ministry statement said.
Indonesia and the IMF also agreed to accelerate asset sales of collapsed banks – a goal pledged by newly-installed Bank Restructuring Agency (IBRA) chief Edwin Gerungan. The IMF has urged Indonesia to accelerate the sales even if returns are low, warning delays could stall economic recovery.
The IBRA manages more than 60 billion dollars in assets of closed or nationalized banks and is a keystone of the IMF program to dig Indonesia out of the shambles left by the 1997 financial crisis.
"Our goal is to promote a viable and global competitive banking system that will enable banks to play its intermediation role in our economy," the statement said. "In this connection bank privatisation, including opening our banks to strategic investors, is our goal."
The ministry said preparations were underway for divesting government ownership in Bank Central Asia (BCA) and Bank Niaga. Indonesia has been under fire from the IMF for delaying the BCA privatisation, once scheduled for completion by the end of this year.
This week's Indonesian/IMF meeting was the first since the Consultative Group on Indonesia decided in Tokyo last month to grant Indonesia 4.8 billion dollars to help fill a 3.7 percent budget shortfall.