BI downplays WB fund delay
JAKARTA (JP): Bank Indonesia Governor Sjahril Sabirin said on Wednesday the reported delay in disbursement of a US$600 million World Bank loan would not negatively impact the country's crisis- hit economy due to improvements in macroeconomic conditions.
He said the bank's funds were intended to help finance the country's social safety net program, which is designed to assist the poor in surviving the economic hardships. But he believed the latter were beginning to subside as the economy picked up.
"A short delay will not have a negative impact on the economy because the macro condition has improved," he told reporters on the sidelines of a hearing with House Commission VIII on finance and state budget. It is deliberating the central bank bill.
Sjahril added there was no official statement from the World Bank to Bank Indonesia on the delay.
"We have yet to receive a formal report from the World Bank."
The Asian Wall Street Journal reported on Tuesday that the World Bank delayed the disbursement after it failed to reach agreement with President B.J. Habibie's government on new measures to monitor the allocation of funds.
The bank was concerned the money would be misused ahead of the June 7 general election, the report cited bank officials as saying.
It continued that the bank would not proceed with the disbursement until a new monitoring mechanism to better track the funds was agreed upon with the government.
Disbursement was originally scheduled for March 31, but activist groups and opposition parties in Indonesia asked the World Bank to delay the measure until after the elections, the paper said.
Opposition figures feared the ruling Golkar Party could use the money to support its reelection bid.
State Minister of National Development Planning and chairman of the National Development Planning Board (Bappenas) Boediono said on Wednesday the government was planning to reestablish a system to effectively monitor World Bank funds.
He said the government was considering input from non- governmental organizations and academics in devising the mechanism.
Negotiations
Boediono added that the government and the World Bank were still in negotiations.
"We're now making preparations (for the new mechanism). There will be a marathon meeting at Bappenas in the coming days," he told reporters after a Cabinet meeting.
He also said the delay would not have a negative impact on the state budget cash flow.
"The state budget is relatively secure," Boediono said.
There has been growing concern over misuse of World Bank funds by the bureaucracy. A World Bank internal report leaked to the media said about 30 percent of bank loans was siphoned off by government officials.
The bank pledged Indonesia $4.5 billion as part of a wider bailout package arranged by the International Monetary Fund in 1997.
It increased the pledge to $5.5 billion last year, but so far has yet to disburse half that amount.
The country's economy plunged by more than 13 percent last year. The economic recession is expected to bottom out this year following recent heartening economic indicators, including 0.18 percent deflation in March, a declining interest rate and an improvement in the exchange rate of the rupiah to the dollar.
The IMF said on Tuesday in a report that Indonesia faces "considerable risks" as it struggles to rebuild its battered economy. However, it acknowledged the chance of slim growth this year, contingent on the government following through on its promised economic reform programs and continuing international community financial support.
A World Bank official said in Washington, D.C., on Tuesday that it would wait until a board meeting on May 18 before considering the approval of two loans for Indonesia totaling $1.1 billion.
The bank economist, who declined to be named, said in a telephone interview with Dow Jones that negotiations were about to get underway in Jakarta this week on a proposed World Bank loan of $500 million to bolster Indonesian social programs.
He also mentioned the $600 million loan, which he said was pushed back until May or June to give the government more time to devise an oversight mechanism to track funds and prevent mismanagement.
The bank's $5.5 billion support package is aimed at ensuring that Indonesia still has funds to provide social services to the poor despite the impact of the recession.
The economist also confirmed that the bank was pressing the government to devise a strategy to ensure funds were used for their intended purposes.
"We are confident this measure is being put in place," the bank economist said. "We remain confident that the projects are going to go ahead as planned." (rei/prb)