[stop-imf] Early IMF debt repayment 'good for Indonesia'

[robert weissman]

February 15, 2006
Early IMF debt repayment 'good for Indonesia'

The Jakarta Post, Jakarta

The government will go ahead with its plans to repay Indonesia's debts
to the International Monetary Fund (IMF) ahead of schedule, the finance
minister said, citing a preliminary study from the central bank that
showed the country was financially capable of doing so and the benefits
that would result.

"Bank Indonesia (BI) has concluded that from the administrative point of
view -- comparing our obligations to pay the loan interest and provide
enough funds to repay the loans while maintaining the security of our
foreign exchange reserves -- early repayment would be more beneficial to
us," Finance Minister Sri Mulyani Indrawati said during a hearing Monday
with the House of Representatives' finance commission.

Indonesia's outstanding debts to the IMF currently amount to $7.8
billion. The debts, which are managed by BI, take the form of standby
loans to support Indonesia's forex reserves.

Between 1997 and 2003, the IMF provided some $25 billion in loans to
Indonesia to help rescue ailing banks and restructure the country's
debts in exchange for the implementation of a number of tough economic
reform programs, including the privatization of state firms and the
cutting of government subsidy spending on fuels and other commodities.

Public criticism was harsh, however, with many commentators questioning
the benefits of the reforms, while the standby nature of the outstanding
debts was slammed for placing unnecessary pressure on the budget.

Mulyani, a former IMF director, said that the government's main reason
for wanting to speed up the repayments was rising borrowing costs.

"The interest rate has risen to 4.58 percent from 4.31 percent since
last year's third quarter in line with the recent hike in U.S. Treasury
bill yields. This is also plus a margin of 1.08 percent," she said.

Mulyani also said that Brazil and Argentina had recently repaid in full
their debts to the IMF, raising concerns that Indonesia, which after
Turkey was now the Fund's second largest debtor, and virtually its
largest income contributor, which could be considered unfair given
Indonesia's status as a developing country.

Mulyani further said that the government was confident about its
financial capacity to fulfill the plan, saying that foreign direct
investment was expected to rise in the coming years, adding increased
revenues to the state coffers.

She declined, however, to elaborate on the repayment details or time
frame pending further consultation with BI.