Robert Go, Jakarta – Indonesia will not seek more loans from the International Monetary Fund (IMF), in a decision that should signal clearly that the country is finally out of its crisis, say senior economic officials in the government.
They say Jakarta is likely to maintain a post-programme monitoring, or PPM, arrangement with the Washington-based lender. Doing so will allow Jakarta to pay its US$9.7 billion debt to the IMF in instalments through 2010.
Should it decide to do away with the PPM at the end of the year, the government will have to immediately repay around US$6 billion, or about one-fifth of its currency reserves, say officials.
President Megawati Sukarnoputri is expected to announce during her Independence Day speech on August 16 that Jakarta will not seek more IMF loans.
Analysts hailed the plan as a good compromise.
Jakarta's 'graduation' from the IMF crisis programme, they said, should please nationalistic-minded politicians who had argued for years that the lenders' reform prescriptions actually do not solve the country's problems.
At the same time, other international lenders like the World Bank and Indonesia's bilateral donors should also be relieved that some measure of IMF input would continue to be given on the progress of the economy and reforms here. This last bit is crucial, as Indonesia remains reliant on borrowing from lenders to finance its yearly state budget deficit and, in general, keep the ship afloat.
A key problem is the fact that Indonesia now has to present periodic letters of intent to the IMF, and the agency gets to grade Jakarta on how well its reforms are progressing.
With the current US$5-billion loan programme approaching its denouement this year, analysts, politicians and government officials have engaged in bitter debates over the past few months about the future of the country's ties with the IMF.
A source familiar with the government's deliberations said last week that a decision had been reached. 'This is a good option. Almost everybody agrees this is the safest option.' Many of Indonesia's top economists agreed, adding that the PPM choice is the best one at this time given the country's economic and political realities.
Dr M. Ikhsan of the University of Indonesia said: 'Politically, there is too much opposition to a continuation of this arrangement with the IMF. Economically, this is also safe and cheap enough for the country.' There are those who disagree, but they are in the minority.
For instance, Development Planning Minister Kwik Kian Gie has advocated that Indonesia pay off the loan in one go.
He said the country's reserves of around US$34 billion is more than enough to repay the agency.