IMF approves $10 billion loan for Indonesian bailout<\/p>\n
WASHINGTON (Reuters): The International Monetary Fund on
\nWednesday approved a $10 billion loan for Indonesia as part of a
\nmassive international package to get the country's economy back
\non track.<\/p>\n
The IMF's executive board said the money would be provided to
\nIndonesia over the next three years assuming it meets the terms
\nof a comprehensive reform package.<\/p>\n
Despite the international bailout, the fund said the economic
\ncrisis would stunt the country's growth over the next two years,
\nand increase inflation.<\/p>\n
The loan \"marks an important step in the process of
\nstabilizing the financial markets in Southeast Asia,\" IMF
\nManaging Director Michel Camdessus said in a statement.<\/p>\n
He applauded new government measures to address the country's
\neconomic problems.<\/p>\n
\"The bold policy actions now being undertaken by the
\nauthorities should not only help restore confidence in the
\nIndonesian economy, but also do much to help calm the turmoil
\nthat has been sweeping the region since July,\" Camdessus said.<\/p>\n
Indonesia's package was announced on Friday after a turbulent
\nweek on world markets, including the biggest one-day point drop
\nin the U.S. Dow Jones stock index and sharp share price movements
\nin Hong Kong.<\/p>\n
It was the third IMF bailout in Asia in four months.
\nIndonesia, long hailed as one of the booming tiger economies of
\nSoutheast Asia, turned to the fund for help last month after its
\nrupiah currency fell sharply on foreign exchange markets.<\/p>\n
A first line of loans will offer Jakarta a total of $23
\nbillion, mostly from the IMF, the World Bank and the Asian
\nDevelopment Bank. But announcements on Friday and pledges made in
\nthe past indicate that contributions from bilateral donors could
\nadd some $17 billion to the package, including $3 billion from
\nthe United States.<\/p>\n
Once all the money is counted up, international aid for
\nIndonesia could total $40 billion, making it the biggest aid
\npackage since Mexico's bailout in 1995.<\/p>\n
The IMF said the government's reform program aimed to restore
\nconfidence and stabilize the rupiah, and to limit an
\n\"unavoidable\" slowdown in economic growth.<\/p>\n
Real gross domestic product growth was expected to slow from 8
\npercent in 1996\/97 to 5 percent in 1997\/98 and 3 percent in
\n1998\/99. The IMF said consumer prices would rise from 6.6 percent
\nin 1996\/97 to 10 percent in 1997\/98 and 9 percent in 1998\/99.<\/p>\n
The fund said measures were in place to keep the budget in
\nsurplus despite the downturn, and that monetary policy would
\nremain tight. Domestic monopolies will be dismantled, tariff
\nbarriers reduced and unviable banks closed down.<\/p>\n
As part of the financial sector restructuring, the government
\nwill compensate small depositors only, and not private
\nshareholders and creditors, the fund said. The government will
\nnot guarantee any liabilities of private non-financial companies,
\ndomestic or foreign.<\/p>\n
The IMF said government revenues should benefit from an
\nincrease in excise taxes, removal of some tax exemptions and
\nincreases in non-tax revenues.<\/p>\n
Camdessus said the government's reform package included \"many
\ndifficult decisions,\" and was proof of the country's commitment
\nto tight financial policies.<\/p>\n
\"I believe that they were decisions necessary for Indonesia to
\nreturn to the path of sustainable high quality growth, to
\nmaintain its economic gains into the next millennium, and to play
\nits key role in the region,\" he said.<\/p>\n
Of the $10 billion approved by the IMF on Wednesday, the fund
\nsaid $3 billion would be available immediately.<\/p>\n
Another $3 billion would be made available after March 15,
\nprovided that the government meet the program's economic targets
\nand the first review of the program is completed. The rest of the
\nmoney will be disbursed on a quarterly basis assuming the targets
\ncontinue to be met, the IMF said.<\/p>\n
In a related development, Camdessus said in Paris yesterday he
\nwas confident that a very ample international rescue package
\nwould return Indonesia to the path of rapid growth after a period
\nof convalescence.<\/p>\n
Camdessus told a news conference the $23 billion package had
\nbeen calculated to deal with the \"most pessimistic scenario of
\n(Indonesia's) financing needs for this year and next year.<\/p>\n
\"In the meantime, Indonesia has had the courage to take the
\nbull by the horns and to take very decisive measures. I have full
\nconfidence that the government, which has resolutely taken this
\ndirection will continue ... and will get the Indonesian economy
\non the rails for durable growth,\" he said.<\/p>\n
Referring to the economic measures Indonesia has taken, he
\nsaid they would let Indonesia \"pursue, after a necessary slowdown
\nphase over the next 18 months... its remarkable growth of the
\nlast three decades.\"<\/p>",
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