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.