JAKARTA, Nov 26: The Indonesian government expects the country’s current account surplus to fall significantly this year mainly due to lower oil prices, and to narrow further in 2002 with exports likely to remain weak, a document showed on Monday.

In a draft letter of intent to the International Monetary Fund (IMF), the government blamed poor exports on the difficult world economic outlook. Some pickup in imports is projected with a strengthening in domestic activity.

“We expect net private capital outflows to slow in 2002, reflecting the more stable political backdrop and our commitment to improve policy implementation,” it said.

“The programme is also based on a moderate accumulation of external reserves sufficient to ensure that net interest reserves fully cover the short term debts. This would be equivalent to about six months’ exports,” it says.

To allow time for the effects of economic reforms fully to take hold, the government is seeking further exceptional balance of payments support in 2002 and 2003.

On fiscal policy, the draft letter said this year’s budget deficit is expected to come in below the budget target of 3.7 per cent of gross domestic product.

The government was faced late in the year with a significant financing shortfall, mainly in the areas of privatization and external government financing, it said.

Some measures have been taken in response, including cuts in lower-priority spending and increasing cash transfers from the Indonesian Bank Restructuring Agency.

However a significant shortfall remains, and the government has reached agreement with key state enterprises to delay some budgeted payments until 2002 in order to cover the budget, the document said.

“Given the short time available to meet the 2001 privatization target following the political transition, the government has focused its effort on a few key enterprises.”

The letter said Jakarta will complete the disposal of its stake in PT Telekomunikasi Indonesia before the end of next year.

The letter contains Indonesia’s reform pledges to the IMF in return for continuing financial aid. It was agreed last week and will be sent to the IMF board for approval.

The government has said it expected the IMF to disburse its next loan tranche of $400 million this year.—AFP