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Key points of Indonesia's agreement with IMF Monday

Dow Jones Newswires - August 27, 2001

Jakarta – Following are the key points of Indonesia's agreement with the International Monetary Fund Monday. The agreement, known as a letter of intent, lays out a timetable for economic reforms which Indonesia must complete in return for loans under a $5 billion lending program. The fund has suspended lending since December due to failure to meet reform commitments.

  • Indonesia promises to keep 2001 budget deficit at 3.7% of GDP as previously agreed with IMF. Proposes to reduce deficit to between 2% and 3% by 2002 budget.
  • Sets other 2001 fiscal targets: GDP growth at 3%-3.5%; inflation between 9.0%-11.0%. Base money supply to grow by 12.5% in the 12 months from March this year.
  • To keep budget deficit on target through following measures: increasing non-oil tax revenues and cuts to fuel and electricity subsidies (both already implemented); further sales of assets taken over from banking system; and partial privatization of state-owned companies.
  • Will raise IDR27 trillion from sale of assets under Indonesian Bank Restructuring Agency, and IDR6.5 trillion from sale of stakes in state-owned companies, as promised under previous IMF agreements.
  • To sell 51% stake in PT Bank Central Asia and a "majority" stake in PT Bank Niaga by the end of 2001. Previously, Jakarta planned to sell only 30% stake in BCA to strategic investor.
  • Sale of 30% stake in state-owned PT Bank Mandiri, country's largest bank in terms of assets, through initial public offering by year-end. Bank Mandiri to takeover PT Bank Internasional Indonesia by end November.
  • Promises to publish independent reports on 10 debt restructuring agreements which IBRA has signed. Many IBRA debt restructuring agreements have drawn flack from IMF for favoring debtors, while failing to recover enough money for the government.
  • Finance Ministry will issue treasury bills by the end of this year to improve local debt market, increasing options for government to fund budget deficit.
  • Plans to review decentralization laws to make sure provinces don't spend more money that they receive through taxation.
  • Postpones planned amendments to central bank law. Government needs six months to find solution to problem. The amendment proposes government can fire central bank governor to increase bank's accountability. But IMF concerned this will reduce bank's independence.