Indonesia expects IMF deal this week

Relations with groups like the IMF have improved since Megawati was sworn in on July 23

By staff and wire reports

JAKARTA, Indonesia -- Indonesia expects to sign a pact on Thursday to help get loans from the International Monetary Fund back on track.

A team from the IMF is visiting Indonesia this week in an attempt to revive the $5 billion loan program.

The mission, led by Anoop Singh, IMF Asia-Pacific deputy director, met with Indonesia's new economics team on Monday.

After his arrival, Singh told local media he was "very optimistic" that the IMF and Indonesia could reach an agreement to get the program back on track.

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State Enterprises Minister Laksamana Sukardi said Monday after meeting with Singh that a new letter of intent, or LOI, would be signed this week.

"It is expected that the new LOI will be completed on Thursday," Sukardi said.

Sukardi, a former Citibank executive, was tapped last week to head Indonesia's bank-reform agency, or IBRA, a key reform body.

Loans suspended in

The IMF suspended a $400 million loan to Indonesia last December, frustrated with the pace of reform under former president Abdurrahman Wahid.

Indonesia's relations with the world's big lenders, like the IMF, collapsed as the country entered political turmoil.

But early signs under new President Megawati Sukarnoputri have been encouraging. Business interests applauded her cabinet choices, including Sukardi.

Her team members are well-known overseas and have a good reputation with groups like the IMF, they said.

A similar team led by Singh visited Indonesia in early July. They drafted a schedule for reforms and a letter of intent. But the IMF's negotiations were disrupted by the ouster of Wahid.

The IMF halted its loan program, frustrated that restructuring in the world's fourth-most populated country was apparently going nowhere under Wahid.

The IMF's senior local representative, David Nellor, says his early meetings with Megawati's administration have been constructive.

Analysts see few obstacles preventing a new agreement. The letter of intent would be a pact reaffirming Indonesia's commitment to reforms.

The IMF's executive board is expected to meet in early September to discuss the $400 million loan. It has said it will review the pace of reforms then, including the sale of state-owned bank assets.

Megawati named her new cabinet on August 9. She took office on July 23 after Wahid was removed from power, bloodlessly, by lawmakers for incompetence.

Reuters contributed to this report.