Simon Montlake, Jakarta – Indonesia should find it easier to restructure $2.1 billion in sovereign debt owed to donor countries at the Paris Club meeting on April 12 after catching up on its economic reform program, the International Monetary Fund said Monday.
"I think the Fund will be supporting the request" to reschedule the debt, said John Dodsworth, IMF country representative to Indonesia. Indonesia has recently made good progress on bank recapitalization and private debt restructuring that should pave the way for the IMF to send a review team in the second half of April, Dodsworth told Dow Jones Newswires in a telephone interview.
The government is struggling to implement a slew of economic reforms after missing the IMF's original March 31 deadline. Missing the target date caused the IMF to delay disbursing $400 million in loans, triggering a slide in the Indonesian rupiah amid concerns over President Abdurrahman Wahid's ability to push through reforms agreed in a Letter of Intent signed on January 20. "There will be discussion in Paris as to the timing of the review," Dodsworth said.
The delayed loan disbursement cast a shadow over this week's Paris Club meeting as some donor countries were reluctant to allow Indonesia to reschedule its sovereign debt unless it remained on track with the IMF program.
However, Dodsworth said the Indonesian government had started to make headway in meeting its deadlines, including recapitalizing PT Bank Negara Indonesia over the weekend and beefing up the Jakarta Initiative, an agency tasked with facilitating negotations between private debtors and creditors. "We've seen some step-up in implementation of reforms in the last few weeks, and are very encouraged by that," he said.
But pressed on the government's claim to be back on track with its reform program, Dodsworth added that "I wouldn't say they've caught up." Wahid's cabinet secretary, Marsilam Simanjuntak said over the weekend that an IMF review team would begin work on April 21 and conclude a week later, but Dodsworth declined to comment further on the review timing.
On Friday, the Indonesian Bank Restructuring Agency said it had implemented nine out of the 14 programs Jakarta had agreed to with the IMF earlier this year. New deadlines have been reached for the other five measures.
It has also registered the initial public offering plan of PT Bank Central Asia with Indonesian regulators. BCA was formerly Indonesia's largest privately owned bank before it was nationalized in 1998. IBRA plans to sell up to 30% of BCA to the public between May 16 and May 19 and hopes to raise around IDR1.4 trillion ($1=IDR7,660) from the IPO.
However, Wahid's government has been slow to tackle deep-rooted problems in the judicial system to the detriment of high-profile legal cases including the takeover of Bank Bali, which was recently annulled by a Jakarta court.
It also backpedalled on a plan to lift fuel subsidies April 1 after political opposition and threats of mass protests against the measure. The government has still not said when it will cut subsidies, but admits that delaying by more than three months would undermine its budget provisions.
The International Monetary Fund says Indonesia doesn't urgently need the $400 million loan as it can easily meet its balance-of- payment requirements.