Indonesia moves closer to break IMF deadlock

Abdullah (L) has moved quickly to break the IMF deadlock since he took over the position of the chief economics minister

JAKARTA, Indonesia - Indonesian officials say they plan to delay a parliamentary debate on controversial central bank law amendments -- a key step towards repairing strained relations with the International Monetary Fund.

The proposed amendments were the only hurdle in resuming a vital $5 billion loan program from the Fund.

Renewed ties would be an enormous boost to a country still limping from the Asian economic crisis of the late 1990s and a fillip for President Abdurrahman Wahid only weeks away from an impeachment hearing over his erratic 20-month rule.

Breaking the impasse would also open the way for the World Bank to more than double its annual aid program to $1 billion.

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In a sign that Indonesia is serious about its intentions, chief economics minister Burhanuddin Abdullah said he spoke with outgoing IMF first deputy director Stanley Fischer on Wednesday morning who said the Fund was ready to come to Jakarta.

Abdullah said there was "a big possibility" that the IMF team would come to Jakarta next month.

Abdullah said he would do anything to end the deadlock, which began in December over a number of missed economic targets and foot-dragging on reforms.

"I am open to any options including the delay," he said.

Parliament Tuesday urged the government, badly distracted by the deepening political crisis, to stall the central bank law debate by six months.

"The most important thing is to get the programs that have been agreed with the IMF back on track," Abdullah said.

Rock bottom

The planned revisions on central bank law have driven relations between Indonesia and the IMF to rock bottom.

In the proposed amendments, the Fund has raised particular objections to an article which stipulates that the whole bank board must resign once the laws take effect.

The Fund fears such a clause would erode the bank's hard won independence and a recent independent report described the as a "serious mistake."

Abdullah -- a former Bank Indonesia deputy governor and the bank's representative to the IMF in Washington in the early 1990s -- has moved quickly to break the deadlock since he was installed earlier this month.

Observers say he has been noted for taking a markedly different line from his predecessor and now Finance Minister Rizal Ramli, who accused the IMF of blackmailing the government over central bank laws.

Instead, Abdullah has taken a more conciliatory approach.

A revived IMF program is necessary for the official Paris Club of creditors to push ahead with an agreement made in April last year to reschedule $5.8 billion of Indonesia's debt.

It would also signal to foreign investors that the country's reform efforts were back on track.

In another positive development for Indonesia, the World Bank on Tuesday approved new loans of $422 million.

The bank said it could increase lending to as much as $1 billion per year if the impasse with the IMF was broken.

Reuters contributed to this report.