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ndonesia’s banking system is strong and well capitalized, as has been proven by impressive improvements in financial stability during the 2008-2009 financial crisis, says a senior official at the International Monetary Fund.

“Indonesia has made great achievements in the last decade to improve macroeconomic and financial stability, with fiscal and monetary policies playing a major part,” IMF senior resident representative in Indonesia, Milan Zavadjil, said to The Jakarta Post on Friday.

The intergovernmental institution overseeing the global financial system made the statement in response to recent local media reports on the IMF’s latest assessment on Indonesia’s economy. The tone of the local media on the report was perceived as negative by the IMF.

“Some recent media stories on the report have been misleading and I would like to clarify the results of the assessment,” said Milan, claiming that even the stress test result, perceived as negative in some quarters, was actually very positive.

The IMF, which viewed the banking system as vital to Indonesia’s economic wellbeing, said the local banks achievements have been significant and showed improving supervisory systems.

On Sept. 16, the IMF released data on a theoretical stress test reportedly to help measure the strength of Indonesian banks in the face of a severe hypothetical crisis with -5 percent economic growth. In the simulation, the level of non-performing loans (NPL) in Indonesian banks was projected to rise to 31.5 percent.

Bankers and analysts responded to the IMF stress test unanimously indicating that the projection was totally unrealistic, portraying almost inconceivable circumstances, especially given the current excellent state of Indonesian banks.

Bank Indonesia (BI) data showed that in the first half of this year, average banks loan growth reached 18.88 percent, while gross non-performing loans (NPLs) remained manageable at 3.5 percent. The capital adequacy ratio (CAR) stood at 18.06 percent in the period ending June 30, higher than the central bank’s currently required level of 8 percent.

Given the current figures, the central bank called the stress test scenario “unrealistic”. The government saw 2011 economic growth at 6.4 percent and is targeting 7.7 percent growth by the end of President Susilo Bambang Yudhoyono’s term in 2014.

“BI expressed objections on the IMF scenario, which was based extremely negative economic circumstances. Even in times of extreme crisis, the central bank would do everything it could to rescue the economy to avoid such a downturn,” BI spokesman Difi Johansyah said in a statement, adding that the stress test should therefore in no way be considered as a forecast.