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Press Statement at the Conclusion of the Mission with Indonesia
An IMF team, led by Daniel Citrin, has spent the past two weeks in Jakarta to conduct discussions for the fourth review of the $5 billion EFF arrangement in support of the Government of Indonesia's (GOI) reform program.
The IMF mission and the GOI have reached agreement on a new Letter of Intent that sets out policies that the government plans to implement over the course of 2002. Following normal procedures, the agreement will be presented to IMF management for their approval before being finalized and signed. Following its signing, the Letter of Intent will be made available to the public, and the IMF's Executive Board will meet to consider the letter and review program performance. The GOI is also requesting a one-year extension of the EFF arrangement through 2003. Indonesia currently has $3.2 billion available under the arrangement and, with the extension, will be able to draw $360 million following a successful review of the Executive Board.
The GOI and the IMF team agreed that macroeconomic stability is fundamental to achieving sustained economic recovery in Indonesia. To that end, there was agreement on setting a fiscal policy course consistent with the goal of striking a balance between supporting economic activity and meeting key social spending needs while embarking on fiscal consolidation that will enable a steady reduction in the level of public debt. The team was also encouraged by the central bank's resolve to reduce inflation to single-digit levels over the course of 2002.
Restoration of private sector economic activity is central to any sustained recovery. In this respect, reforms to the banking system, corporate restructuring, returning IBRA managed loans, banks, and other assets to the private sector, strengthening of decentralization, privatizing state owned enterprises as well as intensifying reform efforts in the justice system are essential. The new Letter of Intent sets out measures in these areas that the mission team believes form a sound foundation for recovery.
The IMF mission believes that strong endeavors in implementing these reforms will restore confidence in the GOI's reform program and sustain Indonesia's economic recovery in the period ahead.