Camdessus says IMF loan to resume after review

Camdessus says IMF loan to resume after review

KANANASKIS, Alberta (Dow Jones): International Monetary Fund
(IMF) Managing Director Michel Camdessus on Saturday stopped
short of predicting when lending to Indonesia will resume, but
suggested there could be action soon.

Camdessus, speaking to reporters on the sidelines of the fifth
annual Asia Pacific Economic Cooperation (APEC) finance
ministers' meeting, said the IMF hasn't suspended Indonesia's
program, and credit will be forthcoming once the IMF completes a
review of its economic-reform efforts.

His assessment, more upbeat than brief remarks he made Friday,
suggested too many questions about Indonesia remain unanswered to
offer a confident prediction about the resumption of
disbursements under the program.

Camdessus' remarks followed an overnight telephone
conversation with Ginandjar Kartasasmita, Indonesia's
coordinating minister for economy, finance and industry.
Camdessus didn't detail his discussion with Ginandjar.

Camdessus outlined some basic conditions that would need to be
met before the IMF aid disbursements would resume. "I hope all
the conditions will soon be there," Camdessus said.

Camdessus said the Indonesian program goals will have to be
readjusted, because renewed weakness in the rupiah requires fresh
assessments of macroeconomic expectations and targets. "We will
have to readjust the program to changing realities," he said.

However, he added that the IMF has "not interrupted our
program with Indonesia."

"We have committed to work closely with the Indonesian
authorities," he said.

Camdessus said the IMF must be assured Indonesia will meet
economic commitments and that "the political situation (is) ...
sufficient" to enable a disbursement.

"The next disbursement will come after a review has taken
place," he said, adding the IMF management won't make explicit
judgments on Indonesia's political regimes.

Such judgments will be made by the IMF's 24-member executive
board, which is concerned about political stability in Jakarta,
Camdessus said.

Camdessus noted the IMF doesn't expressly attach political
conditions to credits. However, the IMF's board, which represents
the fund's shareholders, wants assurances there will be
sufficient political stability to assure success of the IMF
program.

"I see good reasons to believe (the board's) judgments will
allow us to proceed with a continuation of our program,"
Camdessus said.

Camdessus indicated the IMF's board might not demand that
Indonesian President B.J. Habibie commit to a specific date on
presidential elections.

He noted the IMF directors are "not so obsessed by political
considerations." But he said they are concerned about "the
effective working of our program" and therefore are concerned
about Indonesian politics.

Camdessus voiced some confidence in the Indonesian economic
team led by Ginandjar. He noted that the team "is a very solid
one, possibly the most solid and credible" that the IMF has dealt
with in recent years.

Camdessus said he is "encouraged" by Habibie's public
statements pledging support for an IMF-backed program.

The IMF was scheduled to disburse $1 billion from its $10
billion standby credit arrangement with Indonesia June 4. But
political uncertainties and civil unrest derailed a program
review that was scheduled to begin two weeks ago.

Hubert Neiss, the IMF's director for Asia and Pacific affairs,
is scheduled to arrive in Jakarta Tuesday to begin consultations
with authorities, and to assess prospects for resumption of
credit. There are some expectations that disbursements could be
restored within a matter of weeks, if not less, according to some
western officials.

World Bank

Separately, Bank President James Wolfensohn said Saturday that
Indonesia has installed "a good-looking cabinet" and he expects
talks to reopen soon on the multilateral's support package.

Wolfensohn noted the World Bank has delayed its quarterly
review of the Indonesian reform targets due to the turmoil that
led to president Soeharto's resignation Thursday. With only three
World Bank staffers now in Jakarta, the bank isn't in a position
to conduct the review, he said.

"I think it's going to be a short period of time" before the
review is started, Wolfensohn told reporters at the APEC finance
ministers' meeting.

"It's not a crisis; it's normal (to have a delay when a
government changes). This is not a drama. This is something that
will work itself out within days," he said.

Wolfensohn pointed out that he was speaking about the
beginning of the review process, not the actual disbursement of
US$1.2 billion, which has been held up due to the turmoil in
Indonesia. He didn't specify a timetable for disbursement.