Jakarta – The IMF said on Tuesday it would resume a vital $5 billion loan programme with Indonesia if the government agreed to delay a debate on controversial central bank law revisions.
Renewed ties would be a big plus for President Abdurrahman Wahid, edging closer to impeachment over his erratic 20-month rule, and signal to donors and investors the country's reforms were back on track. Indonesia's parliament earlier on Tuesday urged the government to stall the central bank law debate by six months to help improve ties with the Fund, cut off since December.
"I believe the Fund would be willing to send a mission soon if the government wishes to follow the comprehensive suggestion by the parliament," IMF senior Jakarta representative John Dodsworth told Reuters.
Head of the parliamentary commission in charge of financial affairs Benny Pasaribu, said the IMF review was more crucial than the planned central bank law amendments, concerns over which have helped push relations between Indonesia and the Fund to their lowest ebb.
"I very much support comments by Benny Pasaribu. It's good for the IMF programme to be put back on track and for Paris Club relations to be regularised," Dodsworth added. The official Paris Club of creditors agreed in April last year to reschedule $5.8 billion of Indonesia's debt but part of the agreement depends on an active IMF programme.
Dodsworth said the mission – which would pave the way for a fresh $400 million loan – was solely contingent on the revised laws which the Fund fears would undermine the central bank's hard-won independence.
Indonesia has already cleared two hurdles for securing fresh IMF loans: revising its 2001 state budget and dropping a much criticised plan to issue asset-backed bonds.
The biggest sticking point on the Bank Indonesia law reforms is Article 75 which stipulates the whole bank board resign once the new laws take effect. An independent report recently said the clause was a "serious mistake".
While Indonesia has been slow to push ahead with key reforms, it has been distracted by the mounting political crisis and hampered by the lack of cohesion between government and parliament.
Lagging reforms were also partly the reason the World Bank slashed its aid programme to Indonesia in January. But the Bank is widely expected to approve a $320 million loan to Indonesia when its board meets in Washington on Tuesday as part of its $1.2 billion, three-year aid programme.