IMF approves $5b loan for Indonesia to seal recovery
IMF approves $5b loan for Indonesia to seal recovery
WASHINGTON (Reuters): The International Monetary Fund threw
Indonesia a new financial lifeline on Friday, approving a new
three-year loan worth $5 billion to help seal a tentative
economic recovery.
An IMF statement said Indonesia, the second of Asia's one-time
tiger economies to turn to the fund for help, would receive $349
million immediately. Further payments will depend on Indonesia
meeting economic targets agreed with the IMF.
"The Indonesian authorities are embarking on a bold and
comprehensive program aimed at restoring growth, entrenching low
inflation, reducing the public debt, phasing out the dependence
on exceptional financing and normalizing relations with private
capital markets," said IMF First Deputy Managing Director Stanley
Fischer.
"As confidence improves and risk premia fall, there is room
for further declines in interest rates, which remain high in real
terms."
The IMF funding follows hard on the heels of an international
agreement to offer Indonesia some $4.7 billion in bilateral and
multilateral loans and grants from other sources, including the
World Bank and the Asian Development Bank.
The new loan replaces a previous IMF credit and makes
additional cash available. In return Indonesia is promising
further efforts to ensure the problems which brought the economy
tumbling down in 1997 do not occur again.
A document outlining policies underpinning the new loan says
that Indonesia expects economic growth of 1-2 percent in the
current financial year, rising to 3-4 percent in 2000-01 and 5-6
percent in the slightly longer term. Inflation will stay at "low
single digits" and reserves will rise.
At the same time the government promised to revive efforts to
restructure banks and firms and do more to improve governance,
the code word the IMF uses when it talks about top-level
corruption.
The document, also details Indonesia's promises regarding
further audits of Bank Indonesia and its intentions concerning
troubled Bank Bali, which the government is promising to sell in
the first half of this year.
IMF lending to Indonesia stalled for months last year amid
fighting in the rebel province of East Timor and while the IMF
waited for the government to publish a probe on payments from
Bank Bali to members of the Golkar party of former president B.J.
Habibie.
"This program is designed to reinvigorate the economic reform
agenda and usher in a new era of sustained growth based on social
justice and good governance," the government said in its Jan. 20
letter to the IMF.
"The government believes that the policies and measures... are
sufficient to attain the objectives of its strengthened economic
reform program. However, it will take any further measures that
may be needed toward this end."