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.