Jakarta – Some top Indonesian officials appear peeved over the latest assessment on the country's economy by the International Monetary Fund, which for six years after the monetary crisis had administered tough and painful medicine to get the country back on its feet.
State Minister for State Enterprises Sugiharto, for instance, said he was disturbed by the remedies suggested by the Washington-based Fund for lingering problems in state-owned banks.
He told reporters Saturday that the government was no longer obliged to follow the economic advice of the IMF as the Fund ended its economic bailout program here in 2003.
"We have our integrity, independence and identity as a nation. The IMF does not necessarily have to be obeyed," Sugiharto was quoted by Antara as saying. He added that the government would only follow the advice of the IMF if it was considered beneficial to the country.
The IMF issued its latest assessment of the country's economy Thursday, which highlighted the need for further strengthening of oversight in respect of state-owned banks' managements and lending practices, particularly in the light of soaring non-performing loan (NPL) levels, high interest rates and lower-than-expected growth.
The IMF board of directors also noted that the strategic privatization of state-owned banks over the medium term should be considered.
But Sugiharto said that the authorities had already imposed tight supervision on the country's banking sector, pointing to the number of institutions involved in the job, such as Bank Indonesia, the accountancy profession and the Supreme Audit Agency (BPK).
"So, in truth, the checks and balances introduced in the banking sector have been the most dramatic. I'm not that overly worried about the supervision issue," he said.
Concerns over the state of the country's banking sector have reemerged following the revelation of soaring NPL levels in Bank Mandiri and Bank Negara Indonesia (BNI), respectively the second and third largest banks in the country by assets.
Mandiri's gross NPLs as of last September stood at 24.57 percent of its total loans, up from 7.49 percent in the same period last year. The equivalent figures for BNI were 14.44 percent and 6.12 percent. With the two state-owned banks accounting for some 27 percent of the market, the banking industry's average NPL ratio has risen to 8.3 percent, compared to only 4.84 percent if Mandiri and BNI were excluded, Bank Indonesia, the central bank, has said.
The authorities are now seeking ways of resolving the NPL problem. One of the proposed measures is the setting up of a special purpose vehicle to take over and restructure NPLs held by state banks. But the plan has been hampered by an obstacle in the form of the 2003 State Finances Law and a current finance ministry regulation, both of which operate to prevent state firms from writing off debts or selling assets at a discount without the consent of the finance minister. In its assessment, the IMF expressed its support for the SPV mechanism.
In other parts of its report, the IMF forecast that the country's economy would grow at a slower rate this year of between 4 and 4.5 percent due to lingering high inflation and high interest rates. The economy grew last year by 5.6 percent.
State Minister for National Development Planning Paskah Suzetta was disturbed by the IMF's pessimistic growth forecast. He stressed that the government was optimistic the official growth target of 6.2 percent was still achievable.
Coordinating Minister for the Economy Boediono also said Friday that the IMF was pessimistic about Indonesia's prospects. "The slowing down of the economy is not as bad as estimated by the IMF," he said. "There will be improvement this year."