JAKARTA - Indonesia is pulling out all the stops to show it's committed to reform, four days ahead of a crucial International Monetary Fund board meeting to decide if the country's stalled US$40 billion bailout can resume.
Ginandjar Kartasasmita, the coordinating minister for economic, finance and development supervision, met with a group of foreign journalists to say the country will likely close more weak banks, and that its not backtracking on dismantling monopolies promised to the IMF.
The moves reflect a growing recognition of the high stakes for Indonesia. The world's fourth most populous country is mired in an economic crisis that has created shortages of food and medicine.
The IMF suspended aid to Indonesia on March 15, after two previous
agreements broke down, in part because of the failure of the government to deliver on reform promises.
Ginandjar promised the country won't strike out a third time. Resumption of aid from the IMF is an important "vote of confidence" the country needs to get its economy back on track, he said.
Ginandjar said the current cabinet, which was formed in March, has learned from the mistakes of its predecessors.
"I feel the support for reform now is very strong from the government," said Ginandjar, who's an engineer by training and took an advanced degree in Japan. He said that support begins with President Soeharto. "Without the support of the president, there's nothing much I can do."
Ginandjar said he met with a group of officials from the IMF, the Asian Development Bank and the World Bank yesterday to allay their concerns as well. After that meeting, Prabhakar Narvekar, the IMF's special envoy to Indonesia, said he's satisfied with Indonesia's commitment to the reform program.
An IMF board meeting on May 4 will determine if aid to Indonesia, in the form of a US$3 billion loan that's been suspended since March 15, should resume. An IMF official said yesterday in Washington that loan will be doled out in three chunks.
Ginandjar also said the government will start stepping up the restructuring of its hobbled financial system, beginning by identifying and shutting down the weakest banks.
"In the next few weeks we should expect that there are some banks that will cease their operations," he said.
About 35 banks are under the umbrella of the Indonesian Bank Restructuring Agency, created to take control of bad banks and either liquidate them or restore them to viability.
The government has shut 23 of the nation's more than 200 banks since late last year, and is trying to nurse more back to health, including PT Bank Danamon and PT Bank Dagang Indonesia, by taking over their management.
More steps
Ginandjar also outlined other efforts that will soon be taken to comply with IMF recommendations. In a move to plug the rising budget deficit, the government will increase electricity and fuel prices in May.
"We will abide by understanding with the IMF that fuel and electricity prices will be adjusted in May or in early June at the latest," Ginandjar said.
The government fixes the price of gasoline, diesel and other fuel oils, and hasn't adjusted them since the devaluation of the rupiah last August. The currency has lost 70% of its value against the dollar in the past year, leading to a surge in the subsidy the government provides on fuels.- Bloomberg
The price for a liter of the cheapest grade gasoline has remained at Rp700, which was 28 U.S. cents in July. Now, it's worth a third of that, or about 9 U.S. cents.
He didn't say by how much prices will rise. The government will also provide a 15% wage increase to civil servants on May 1. |
