HK considers backing IMF's Indonesia bailout

HK considers backing IMF's Indonesia bailout

HONG KONG (Reuters): Hong Kong said on Saturday it was prepared to consider supporting the International Monetary Fund's (IMF) massive aid package for Indonesia, but stopped short of specifying an amount.

Financial Secretary Donald Tsang had responded positively to an IMF request for Hong Kong's participation and said "Hong Kong is prepared to consider supporting the contingency supplementary financing arrangements," a government statement said.

"No amount has been committed by Hong Kong as it is merely a request from IMF to consider participation in the event that additional resources are deemed necessary," it said.

The IMF approached Tsang seeking Hong Kong's participation in contingency financing arrangements to supplement the aid package to restore confidence in the country's economy.

On Friday, IMF Managing Director Michel Camdessus announced a US$23 billion financial package to help stabilize Indonesia's financial system. He said bilateral donors including Hong Kong were prepared to provide additional finance if necessary.

Other announcements on Friday and pledges made in the past indicate that contributions from bilateral donors could add some $17 billion to the package.

Financial stability in Asia was of strategic interest to Hong Kong, the government said.

"This is a common cause that, Hong Kong, as a leading financial center in the region, should support," the statement said but gave no details on the sum the Hong Kong government would consider contributing.

The government said it welcomed the move by the IMF to organize a firm financing package and the supplementary arrangements.

"The size of the financing package that the Fund is organizing should be more than adequate to restore confidence in Indonesia and have a calming effect on financial markets in the region," it said.

Sharp falls in Asian markets were prompting serious fallouts on markets in the United States, Europe and Latin America, the statement said.

"We are pleased that this measures will address the contagion effect of financial turmoil in the region," it said.

Hong Kong itself has been rocked in recent weeks by an attack on its currency. A sharp hike in interest rates, made in a bid to fend off speculators, sent stock prices crashing.

The Hong Kong dollar is the last currency in the region pegged to the U.S. dollar and the latest to come under speculative assault.