Disbursement of $1.1b WB loans delayed
Disbursement of $1.1b WB loans delayed
WASHINGTON (Dow Jones): Bowing to U.S. concerns, Indonesia agreed not to spend $1.1 billion in new World Bank loans for social safety net programs until after national elections are held next month.
The commitment was made on Tuesday after the U.S. on Monday placed a 48-hour delay on the World Bank's approval of the new loans, citing fears that the money would be perceived as a boon to the ruling party in advance of the June elections.
But the World Bank said on Tuesday it had approved loans totaling $400 million for two Indonesian projects.
The World Bank said in a statement it will provide $300 million to fund a revamp of water resources management in Indonesia and an additional $100 million for relieving poverty in urban areas.
Government opponents in Indonesia and development activists in Washington have campaigned against the loans because they contend the money will be stolen by the ruling party for patronage or vote buying.
The bank had already required Indonesia to agree to tough safeguards against misuse of the funds, but U.S. officials sought the additional guarantee out of concern that the bank would be seen as taking sides in Indonesia's first election since the downfall of President Soeharto last year.
"We think these loans deserve the support of the bank, and we're comfortable with protections in place to ensure that resources go to their intended purposes," said one U.S. official.
The bank's board, originally slated to consider the loans on Tuesday, is now expected to approve them on Thursday. While some funds may be turned over immediately, Indonesia agreed to hold them in an account until June 30.
"The government of Indonesia does not need immediate disbursement of the funds from these loans," a senior Indonesian government official said. The delay "should remove any doubt that the funds will be directed to other than their designated purpose," he said.
A World Bank spokesman said "technical" details need to be finalized and that the additional $1.1 billion in loans should be approved without further hitches at Thursday's board meeting.
Earlier this year, the World Bank delayed disbursing the $600 million loan because the Indonesians had dragged their feet in instituting surveillance procedures to ensure the funds aren't abused.
Government officials already had admitted that money from the social safety net fund has been illicitly channeled into political activities.
In Jakarta, hundreds of non-governmental organizations (NGOs) including Urban Poor Consortium (UPC), International NGO Forum for Indonesian Development (INFID) and the Indonesian Consumers' Foundation issued a joint statement on Tuesday asking the WB to postpone the disbursement of the two additional loans planned to be discussed on May 20.
The WB should be transparent in extending the loans to Indonesia and should also listen to the local people, the groups said.