IMF approves $960m loan for Indonesia

IMF approves $960m loan for Indonesia

WASHINGTON (Reuters): The International Monetary Fund approved on Friday a $960 million loan payment to Indonesia from a global rescue package and urged the government to speed the pace of banking reform and debt restructuring.

The IMF said its executive board approved the payment from a $42-billion-plus international package arranged by the Washington-based lending agency in November 1997.

The IMF pledged more than $11 billion in loans to that package, and has paid out nearly $8 billion including Friday's installment.

"Due to good policy implementation, the Indonesian economy is showing welcome signs of stabilization," IMF Managing Director Michel Camdessus said in a statement.

The rupiah currency has strengthened, inflation has slowed sharply, and interest rates have begun to decline, Camdessus said.

The rupiah edged higher on Friday, lifted by more dollar selling by state banks although dealers noted the currency remained vulnerable. The currency ended at 8,400/8,500 against the dollar in Jakarta trading compared with 8,500/8,700 at the Jakarta close on Thursday.

Camdessus urged the government to make "rapid progress" reforming the banking sector and to press ahead with corporate debt restructuring. "Together with consolidation of the progress in stabilization, these reforms will create the basis for a sustained recovery of output," Camdessus said.

The IMF assembled the bailout after Indonesia's financial markets collapsed amid the wider Asian financial crisis. Economic conditions deteriorated in May when political and economic chaos broke the 32-year rule of former President Soeharto, prompting the IMF to freeze loan payments.

Disbursements resumed in July, and donors agreed to increase bailout lending to support the programs of the new president, B.J. Habibie.