Indonesia may get IMF loan next month

By staff and wire reports

JAKARTA, Indonesia -- The International Monetary Fund hopes to get a vital loan package to Indonesia back on track in August.

The IMF's $5 billion loan program has been gridlocked for six months. The group is dissatisfied with the pace of reforms there and last December delayed a $400 million loan.

The government had expected to sign a letter of intent to free up the money last week, when a team of IMF officials visited Indonesia.

But the mission left without any clear change after more than a week of talks.

Success underestimated

John Dodsworth, the IMF's senior representative in Indonesia, told Reuters that the success of the mission was underestimated.

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The IMF wants to release the $400 million "sometime in the second half of August, that is our aim," Dodsworth said.

The loan would be a shot in the arm for embattled President Abdurrahman Wahid. Some observers have suggested the IMF wants to wait to see what happens to his presidency, to avoid having to renegotiate any deal.

Wahid could be forced out of office next month, with the legislature slated to start impeachment hearings on August 1.

Dodsworth also said the impeachment hearings would not slow up the loans.

Even with an impeachment, "we would expect this [the loan] to go ahead in the same way," he said.

A draft in the works

Indonesia and the IMF have reportedly drafted a letter of intent that pushes the country to go ahead with reforms.

One of the key requirements is for Indonesia to sell off part of PT Bank Central Asia, Indonesia's largest retail bank.

Indonesia took over many of its banks after the Asian financial crisis in 1997 and now holds two-thirds of the country's assets.

The IMF is pushing the government to sell off its banks to get its economy back in shape.

Dow Jones Newswires reports the draft calls for the government to sell 30 percent of Bank Central Asia by the end of September.

Indonesia sold 10 percent of the bank in a public offering this month. But it is struggling to find a buyer for the rest.

The draft lays out a schedule for other reforms, such as trimming Indonesia's budget deficit. The IMF and the Word Bank will review the country's progress in September, it says.

Reuters contributed to this report.