ADB poverty loan not linked to IMF program: Official

JAKARTA (JP): Asian Development Bank (ADB) Indonesia representative Jan Van Heeswijk said on Wednesday that its loan for poverty reduction would not be linked to the International Monetary Fund (IMF) reform program.

But Heeswijk said that the Manila-based multilateral institution's loan for lending for policy reforms would be disbursed only if the Indonesian government is committed to reform agenda agreed with the IMF

"If there would be delay in the reforms in the financial and macroeconomic sectors, it will be difficult for us to proceed with lending for policy reforms. But our lending for projects directly focused at poverty would continue," he told reporters on the sidelines of a workshop.

The IMF delayed late last year the disbursement of its next US$400 million loan tranche to the country due to the government slow progress in the implementation of key reform program particularly in the sale of government shares in Bank Central Asia and Bank Niaga, and concern over the poor implementation of new regional autonomy law and the government-proposed amendment of the central bank law.

The delay in the IMF loan has prompted both the World Bank and ADB to issue a stricter conditions for the disbursement of their loans to Indonesia.

A significant reduction in lending from the two institutions would seriously harm the country's state budget.

ADB said last week in its new "country operational strategy" for Indonesia that it was prepared to lend Indonesia between US$600 million and $1.2 billion a year over the next three years, provided the government pressed ahead with key reforms.

The bank, however, did not give details on the specific criteria it was setting up for Indonesia nor did it say to what extent it would cut loans if they were not met.

The country borrowed about $1.2 billion from ADB annually before the economic crisis started in middle of 1997. During the crisis, lending commitments increased to $1.8 billion in 1998 and $1.5 billion in 1999.

Elsewhere, Heeswijk expected the IMF to disburse its loan soon as there had been a "narrowing of position" between the IMF and the government over reform program.

"We would hope so, there has been a narrowing positions as I understood," he said.

But he declined to speculate when the Fund would disburse its loan.

The government recently agreed to the IMF demand to set up a panel of international and domestic experts to provide input and review the government proposed amendment of the central bank law.

The IMF has expressed concern that the amendment of the central bank law would do harm to the independency of Bank Indonesia in implementing monetary policy.

The government has also recently obtained approval from the House of Representatives to sell its majority ownership in BCA and Bank Niaga in the first semester of this year.

The sale program was supposed to be completed last year, but it was delayed due to bad market condition at the time.

Over the issue of fiscal decentralization policy, the government is expected to issue a decree banning regional administration from making borrowing in the near future to finance their new autonomy power.

Some government officials have said that the IMF was expected to release the loan sometime in late April.

Heeswijk also said that Jakarta representatives of Indonesia's major donors grouped in the so-called Consultative Group on Indonesia (CGI) were expected to convene late in April.

ADB is a member of the CGI, which is coordinated by the World Bank.

Heeswijk said that the final CGI meeting is expected to take place in October of November.

But he said that it was not yet decided whether the CGI meeting would take place in Jakarta or other country. (rei)