Jakarta – The International Monetary Fund (IMF) called Wednesday for a "clear strategy" from the Indonesian government to recover loans worth billions of dollars which were extended to save the country's banks.

It said a visiting IMF team led by Daniel Citrin, the senior Asia-Pacific adviser, had held talks with authorities on the need to improve the recovery of funds from "shareholder settlements" with the banks' former owners.

"The team looks forward to the government developing a clear strategy on this matter, recognising its importance for fiscal recoveries," the IMF said in a statement. "In this regard, strengthening compliance as well as securing legal certainty for both government and former bank owners must be integral elements of the strategy."

The fund is coordinating a five billion-dollar aid package for Indonesia in return for broad economic reforms. Bank Indonesia, the central bank, between 1998 and 1999 injected some 144.5 trillion rupiah (now 14.3 billion dollars) in emergency liquidity to banks suffering from the financial crisis that began in mid-1997.

But a report by the state Supreme Audit Agency in August 2000 concluded more than 95 percent of the funds had been misused. Only a fraction has since been returned to state coffers and assets pledged as collateral are worth only a fraction of total loans.

The government is considering a controversial plan to extend the repayment period for debtors to 10 years from four. Most debtors have yet to make a single repayment three-and-a-half years into their agreements with the Indonesian Bank Restructuring Agency (IBRA), and the agency said it has mostly been on the losing side of litigation against large delinquent debtors.

The IMF said Indonesia's macroeconomic policy is in line with the targets set out in their lending deal and inflation should slow to single digits by year-end. It said the 2001 state budget deficit was contained within the target of 3.7 percent of gross domestic product.

The IMF said January's cut in fuel subsidies was an important step towards achieving the 2002 budget goals. The fund said progress towards structural reforms, particularly with regard to privatisations and asset sales, was also heartening.

It said it was looking forward to the sales of assets of Bank Central Asia and Bank Niaga by IBRA to enhance the investment environment and reinvigorate banking.