IMF Debt Repayment

Oct 7th, 2006, in Business & Economy, IM Posts, by

Indonesia will shortly pay off its entire debt to the IMF.

Indonesia will have completed its repaying of all debts, totalling $3.2 billion, to the International Monetary Fund (IMF) within a week's time said Bank Indonesia (BI) governor Burhanuddin Abdullah. The central bank notified the IMF of its intentions on the 5th, hoping to shortly join Brazil and Argentina as a country which had freed itself of IMF debt this year. Said the governor:

As of today we no longer have any more debts to the IMF. We are now a regular member, and no longer a "sick" member undergoing treatment.

We expect this will provide more room for Indonesia's economy to grow with more confidence and in a healthier fashion without being burdened by IMF debt.

Previously in June the central bank had paid off $3.7 billion of Indonesia's then approximately $7 billion in debt to the IMF, following President Susilo Bambang Yudhoyono's request to settle the debt within the next two years. The IMF actually does not require re-payment until 2010.

The deputy governor of BI, Hartadi, explained that the earlier debt repayment was possible due to Indonesia's strong foreign exchange reserves position, standing at $42 billion.

The planned re-payment will save the country some $500,000 in interest payments this year, which were expected to reach $22 million.

Finance Minister Sri Mulyani Indrawati, who was the first to propose repaying the IMF debt ahead of schedule, said recently that Indonesia could save at least $100 million in total interest payments by 2010.

Sri Mulyani, who is a former IMF executive director, had argued for the earlier debt re-payment because of the increasing burden of servicing, and considering that the money only functioned as a stand-by loan strengthening Indonesia's foreign exchange reserves.

Between 1997 and 2003, the IMF provided some $25 billion in loans to help Indonesia rescue its failing banking system, rehabilitate its economy by restructuring private and government debt, and strengthen its foreign exchange reserves.

Much resentment arose however as the loan conditions required the government to implement a number of austerity measures under IMF supervision, including the privatization of state firms and the reduction of subsidies. Many nationalist-populist politicians and public figures saw these steps as harming the nation's interests.

The government, under public pressure, eventually terminated its program with the IMF at the end of 2003, but still remained under the Fund's "post-program monitoring" to assess the government's own reform targets.

However, on the sobering side, Indonesia still has to pay 63.5 trillion rupiah, or $6.9 billion, in interest this year on its outstanding foreign, non-IMF, debt, which totals $61 billion.

October 12th.

The total amount of SDR 2.153.915.825, equivalent to $3,181,742,918, (USD/SDR = 1,47719) was paid off today.


2 Comments on “IMF Debt Repayment”

  1. avatar Purba Negoro says:

    One shackle cut, many more to go.
    “Thank God we are free at last, free at last”- Martin Luther King Jnr.

    Bravo Ibu Menteri Sri Mulyani. Sugeng Sukses.
    A shining star eclipsing the lacklustre dust-cloud of the pathetically incompetent useless and bufoonish Pangestu.
    More proof Chinese are totally incapable of any political task, even one so childishly simple as Trade.

  2. avatar Andy says:

    Patung-Much resentment arose however as the loan conditions required the government to implement a number of austerity measures under IMF supervision, including the privatization of state firms and the reduction of subsidies. Many nationalist-populist politicians and public figures saw these steps as harming the nation’s interests.

    Well surprise surprise, guess what guys…The Western world was doing pretty much the same thing years before Indonesia had to. We sold off the Commonwealth bank, Qantas, privatised state electricity companies and of course Telstra. That is what countries do when they have to stand on their own two feet. Of course all these measures have been very unpopular but governments at some point need to balance budgets and how do you do that? By standing at the west’s doorstep with your hand out? ‘please mister give me money’ the catchcry of the typical Indonesian. Well from all socio economic groups that changes. In the form of the very poor begging at traffic lights to the top end of town slapping outrageous taxes on bules and chinese. And tourist attracions having their ‘bule price’ and local price. Anyone been to Borobodur?

    Yes the spoonfed Indonesian populace went crazy the day SBY made the brave move to cut petrol subsidies but that is the way the world works guys. There’s no such thing as a free lunch. Money doesn’t materialize from out of the sky. And i’m frankly sick and tired of watching my own government give it to you when we can’t support all of our own. Particularly the way the world economy is heading.

    No you have never ever gained true Independence. Bludging off the rest of the world is not being independent. Indonesia is like a teenager. Mum, I can do what I want now give me my pocket money.

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