In a press conference held after the LoI signing,Dorodjatun said announced that the IMF has agreed todisburse US$ 400-million in funds. The funds arescheduled to be disbursed within these two weeks. Dorodjatun added that in the LoI, both parties hadprioritized the economic and financial policies gearedto maintain trust in the market.
The finalized economic policy contains 34 main points.Among these are: (1) the macro-economic policies for2001 referred to in the State Budget outline, thatlists targets of 3-3.5 percent for the rate ofeconomic growth and 9-11 percent for the rate ofinflation; (2) the monetary sector is to becoordinated in accordance with inflation targets andthe real interest rate is to be maintained; (3)theIndonesian government is committed to the developmentof a strong central bank with good accountabilityand(4) that the government adhere to the agreed Budgetadjustments [an agreement reached with the House ofRepresentatives (DPR)], including a 30-percentincrease in oil prices for non-industrial users andadditional electricity costs for big consumers in twostages.
Apart from that, the IMF hope to see a decrease in theimpact of non-neutral interference with fiscaldecentralization, a careful prioritization of thedevelopment budget and to make efforts towards thebudget incomes.
The 30 other points mostly review the implementationof 2001 State Budget and the 2002 Budget draft. Theagreement includes the restructuring of the IndonesianBank Restructuring Agency (IBRA) that must reach itstarget of Rp 27 trillion in cash and Rp 10 trillion inbond-funds by the end of this December. The LoI hasalso stipulated the need for efforts to improvebanking performance. In this regard, the Bank ofIndonesia must monitor all banks and emphasize thepractice of caution and transparency. The governmentwill strengthen its monitoring activities over thefinancial institutions.
The LoI also targets Rp 110.5 trillion for Indonesia’sbase money until the end of this September, with arate of growth pitched at 12.5 for this year. Ministerof Finance Budiono has yet to decide the value of therupiah’s fixed rate against the US$. However, heexpects the rupiah can reach Rp 8,000 to 9,000 per US$when the economic team deliver the 2002 State Budgetdraft to the DPR.
Dorodjatun expressed his gratitude for the goodco-operation that has been established by the IMF andcabinet economic team. “We will simply continue withthe implementation of the LoI so that Indonesia’seconomic recovery program can be achieved smoothly,”he said. Anoop Singh stated, however, that theimplementation of the LoI is the most difficult part. He expects that the next IMF review will show someimprovement.
State Minister on State Enterprises Laksamana Sukardiand Minister of Industry and Trade Rini Suwandi werealso present at the LoI signing.