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.