IMF approves $940 million payment for Indonesia

IMF approves $940 million payment for Indonesia

WASHINGTON (Agencies): The International Monetary Fund (IMF)
approved a US$940 million in extended fund facility (EFF) as part
of its $11 billion loan to Indonesia on Friday and said it
welcomed progress already made in restructuring Indonesia's
foreign debts.

IMF Managing Director Michel Camdessus said in a statement
that he was encouraged by the rupiah currency's recent stability
and he praised the government's "good policy implementation under
extremely difficult circumstances."

Indonesia was the second one-time Asian tiger economy to turn
to the IMF for help and its IMF loan was part of an international
rescue deal worth more than $40 billion.

Earlier this week it agreed a $4.2 billion debt reorganization
with the Paris Club of country creditors and it is now working on
a deal with commercial creditors.

But reforms underpinning the loan got off to a shaky start and
the reform program was renegotiated several times. More than
1,200 people died in bloody rioting earlier this year after the
government, bowing to and exceeding IMF demands, scrapped
subsidies on food and fuel.

In Friday's statement Camdessus said he welcomed the latest
government decisions on subsidies, including the provision of
rice at subsidized levels to the poor.

"I welcome the intensified efforts made by the government to
hold down the price of essential commodities and the expansion of
the program to provide rice at greatly subsidized prices to poor
families," he said.

The IMF has already said it expects Indonesian gross domestic
product to fall by as much as 15 percent this year, the steepest
fall among the IMF's borrowers in Asia.

Fund officials say a government currency target of 10,000
rupiah to the dollar by next March's end of the fiscal year, a
gentle improvement from current levels around 11,000.

The fund originally provided Indonesia with a "stand-by"
credit arrangement last autumn, which was intended to remedy
temporary balance-of-payments difficulties. But that program was
altered more than once this year amid persisting financial
difficulties and was eventually converted into an EFF in August.

The EFF is meant to address structural reform issues and
offers a longer repayment period.

The switch in type of facility in August didn't change the
total amount committed by the institution to Indonesia. At the
time of the switch in August, the IMF had already disbursed about
$5.1 billion of the $11.3 billion total, and upon that Aug. 25
decision it disbursed roughly $1 billion.

Friday's outlay was the next scheduled disbursement.

The next one is scheduled for Oct. 25, and it is also expected
to amount to about $940 million. After that, disbursements are
due Nov. 25, 1998; Feb. 15, May 15, Aug. 15, Nov. 15, all in
1999; and then continue through October 2000.

The tranche amounts vary in dollar terms, because they are
concluded in special drawing rights, the value of which
fluctuates. In terms of SDRs, the loan tranche released Friday
totaled SDR684.3 million. The fund used an exchange rate of
SDR1=$1.36480 to come up with $940 million. The tranche released
in August amounted to SDR733.8 million.