A revised programme agreed between the Indonesian government and the IMF in September has led to few changes. In August, Rizal Ramli, the Indonesian government’s new senior economics minister asked the International Monetary Fund to delay its next loan disbursement, to give time for a review of the $5 billion program. The government wanted the IMF to focus more on macroeconomic issues and less on sectoral issues, such as agricultural and infrastructure development. It was concerned that some of the terms of the current agreement were not appropriate and were destabilizing the Indonesian economy and currency.
The IMF Board in Washington, USA, approved on 7 September the disbursement of another US$400 million, following the renegotiation of the IMF deal. However, the new Letter of Intent is essentially the same as the one signed by the government on 31 July, except for the stipulation of a ten-point economic programme.
The main changes to the deal include:
- inclusion of Dr. Ramli’s ten-point list of economic priorities;
- commitment to increasing borrowing from the World Bank, IMF and Asian Development Bank (the government is seeking US$1.2bn from IDA, a significant increase from the total US$1.5bn lent to Indonesia in 2000);
- commitment to reducing fuel and electricity subsidies in October 2000;
- agreement to accelerate privatization of state-owned enterprises;
- the Indonesian Government will abide by the law on foreign exchange management and keep an open capital account, ie not capital controls;
- the World Bank and ADB will now take the lead in the discussions on agriculture issues;
- agreement to ensure sustainable development of natural resources.
“The new deal is also unlikely to bring any optimism to the 50 per cent of Indonesia’s population that have an even chance of falling into poverty this year according to the World Bank in Jakarta,” commented UK-based NGO, Down to Earth.
The new IMF Agreement is available at: