Robert Go, Jakarta – An IMF review team slipped out of Jakarta late Tuesday night without resolving its stalled US$5-billion bailout programme here, signalling the agency's lack of confidence in the government and leaving the economy in a path towards a meltdown.
A banker with close government ties said: "The signal is clear: they don't have any belief that this government can deliver the programme any more.
"They would be wasting time continuing to work with this government."
The IMF team, led by Asia-Pacific director Anoop Singh, arrived two weeks ago to evaluate Jakarta's economic programme and to make recommendations on a US$400 million loan tranche that has been delayed since last December.
The team members stayed and left. They avoided media exposure and the trouble of explaining why they could not give a much-needed boost to President Abdurrahman Wahid's administration.
Analysts said the IMF knew by last week that Jakarta's problems posed a "mission impossible" for the current government.
The Washington-based lender cited several issues as stumbling blocks to further loans, including rampant corruption, a growing budget deficit, slow asset sale programme, legal uncertainty and poor implementation of previously pledged reforms.
The IMF stressed "cooperation" with the government during its last address to a group of donor countries on Tuesday, but it also outlined several dire projections.
"Developments are beginning to affect the macroeconomic framework and place Indonesia's recovery at risk," the IMF said in a statement.
Furthermore, the budget deficit, projected to reach over 6 per cent of Indonesia's GDP, "could further weaken market confidence and could not be financed without leading to a further increase in inflationary pressure".
The IMF's approval is crucial not only to Indonesia's programme with the agency, but implementation of a slew of other loans, grants and debt-rescheduling programmes promised by other donors also depended on the IMF's lead.
Analyst Raden Pardede of Danareksa Research Institute said that without an IMF deal, Indonesia faces a vicious cycle of economic and political instability.
He added: "One reason why the economy is under pressure is due to political instability, which contributes to low investor confidence and further economic problems.
"There has to be a clean break from this cycle if Indonesia wants to return to a recovery path, but unfortunately the administration has been unable to secure strong positive signals from the IMF or other international lenders."
Mr Abdurrahman's opponents in Parliament took the IMF team's departure simply as confirmation of what they have known for the last year - the current government is ineffective and should be removed from office.
Mr Pramono Anung, a legislator from Vice-President Megawati Sukarnoputri's PDI-P, said: "It was a strong message that even the international community is tired of dealing with this administration."