IMF announces $23b aid package for Indonesia

Sat, 01 Nov 1997, 00:00 WIB | Source: REUTERS

WASHINGTON (Reuters): The International Monetary Fund
announced yesterday a $23 billion multilateral financial package
involving the World Bank and Asian Development Bank to help
Indonesia stabilize its financial system.

At a news conference here, IMF Managing Director Michel
Camdessus said bilateral donors -- Australia, China, the Hong
Kong administrative district, Japan, Malaysia, Singapore and the
United States -- were prepared to provide additional finance if
necessary.

Some estimates have put the overall amount at around $30
billion, and possibly more.

"These measures should restore confidence in the Indonesian
economy and contribute to the stabilization of regional financial
markets, and I hope beyond," Camdessus said.

Detailing the multilateral package, he said the IMF would
provide a three-year standby loan facility of $10 billion, The
World Bank would provide $4.5 billion and the Asian Development
Bank another $3.5 billion.

In addition, there were other expected contributions including
use of a part of Indonesia's substantial external assets. "We
arrive at a first line of financing in the order of $23 billion.
This is without touching the present $20 billion of reserves of
Indonesia," Camdessus said.

Indonesia said on Oct. 8 it was seeking IMF assistance to cope
with a steep slide in its rupiah currency and earlier yesterday
announced a series of fiscal and banking reforms, cuts in tariffs
and deregulation.

In a separate statement yesterday the World Bank pledged $4.5
billion in adjustment, operations and investment loans to support
Indonesian financial sector restructuring and long-term
structural policy reforms.

"We strongly welcome the economic reform program announced by
the Government of Indonesia earlier today and plan to support its
implementation with a package of loans and technical assistance,
World Bank President James D. Wolfensohn said in Washington.

The World Bank said the initiatives are part of a package
being assembled by the Indonesian government with the support of
the IMF, Asian Development Bank, the World Bank and key bilateral
donors.

Wolfensohn said the financial support is to be accompanied by
technical assistance to help the government implement complex
banking sector reforms.

"Overall, to support Indonesia's economic growth and
development, the World Bank plans to disburse a total of $4.5
billion over the next three years for adjustment operations and
existing and planned investment loans," Wolfensohn added.

U.S. contribution

Meanwhile, the Associated Press quoted U.S. officials in
Washington as confirming yesterday that the Clinton
administration will commit $3 billion to an economic rescue
package for Indonesia.

The U.S. contribution in loans will come from the Emergency
Stabilization Fund, the same source of support that President
Bill Clinton tapped in 1995 to rescue the Mexican economy after
its currency collapsed.

The administration, which had declined to play a major role in
a $17.2 billion bailout package assembled in August for Thailand,
was forced to reconsider following Monday's record stock market
plunge on Wall Street triggered by the spreading economic
troubles in Southeast Asia.

Administration officials said that U.S. loan assistance would
only be tapped if the initial credit support provided by IMF
proves insufficient to help Indonesia stabilize its economy.

That effort triggered heavy criticism by Republicans in
Congress, who charged the Mexican plan put U.S. taxpayers at risk
to bailout wealthy investors who were burned when Mexico's
currency collapsed in December 1994.

In the case of Mexico, the United States provided $12 billion
in loans - all now repaid - from the Emergency Stabilization
Fund.

The fund was established in the administration of Franklin
Roosevelt to support the U.S. dollar. After Clinton was unable to
get quick congressional approval to help Mexico, he turned to the
fund, which is administered by Treasury and the Federal Reserve.