ADB threatens to withhold loans to RI

ADB threatens to withhold loans to RI

MANILA (AFP): The Asian Development Bank (ADB) Tuesday threatened to withhold the release of at least US$120 million in loans to Indonesia next month unless a scandal surrounding Bank Bali is resolved.

The ultimatum followed a similar warning by the International Monetary Fund (IMF) last Thursday over the controversy, which has mired Indonesian government and banking officials in scandal.

Shoji Nishimoto, a director for the Manila-based ADB, told a news conference that $70 million had been due for release to Jakarta in October for a community and local government support project, along with a $50 million loan for a social protection project.

"Under the present situation, we don't expect any disbursement for this year," Nishimoto said.

The two loans are part of the ADB's contribution to a multi billion-dollar international rescue package organized by the IMF for Jakarta after a currency crisis plunged the economy into chaos in mid-1997.

The Bank Bali case, involving a huge "commission" of some $80 million paid to a former deputy treasurer of the ruling Golkar party, has been rocking Jakarta financial markets since it emerged in July.

Indonesian newspapers have alleged the commission, since repaid, was intended to partly bankroll President B.J. Habibie's November election bid.

Bank Bali says it paid the money to recover loans it had paid to three banks closed down by the government. Three officials involved in Indonesia's bank restructuring drive are among those under police investigation.

Nishimoto said the ADB would "review the situation" next month, and "that's when the actual deferral" would be imposed unless the scandal was resolved to the ADB's satisfaction.

"The resolution of the Bank Bali affair is critical for continuing support of the program," Nishimoto said.