IMF approves release of latest tranche of aid package

IMF approves release of latest tranche of aid package

WASHINGTON (Dow Jones): The International Monetary Fund (IMF)
on Tuesday approved the extension of a US$957 million credit to
Indonesia under the $43 billion economic rescue package it
assembled in November 1997.

This installment comes hot on the heels of a Nov. 6
disbursement of $960 million to Indonesia by the IMF, a payment
that had been delayed by around one week from the scheduled
release date by "technical" factors.

It marks the last monthly release of the fund's overall $11.3
billion standby loan facility for Indonesia, which anchors the
package of funds to be provided by multilateral and bilateral
lenders to assist Indonesia in recovering from currency weakness
that wrecked its economy in 1997.

Next year, the IMF will conduct reviews every two months for
the first six months of the year, after which it's set to move to
its usual quarterly examinations.

Alassane Ouattara, deputy managing director at the IMF, said
in a statement the decision to provide another tranche of funds
under the IMF's Extended Fund Facility follows a third IMF review
of the state of Indonesian economy and government policies.

"The Indonesian economy has remained on the stabilization path
under the most difficult circumstances," Ouattara said.

"Continued policy implementation, despite an environment of
political uncertainty, has helped improve market sentiment and
the rupiah has strengthened considerably."

Meanwhile, Indonesian Coordinating Minister for Economy,
Finance and Industry Ginandjar Kartasasmita said in Hanoi on
Wednesday that the release of IMF loans should help to lift the
rupiah.

"I think it should strengthen the rupiah. At least it will not
weaken it," Ginandjar told Dow Jones Newswires on the sidelines
of the Association of Southeast Asian Nations summit here.

The U.S. dollar was trading at 7,840 rupiah Wednesday morning
in Asia, up from 7,605 late Tuesday.

The IMF official noted signs of growing business confidence,
while inflationary pressures appear to be easing, and "marked
progress has been made is stabilizing the food situation."

There have been incidents of Indonesians rioting as product
prices soared across the country, adding to the public pressure
already building around the administration of President B.J.
Habibie.

Ouattara said that while there appears to be "scope for
progressively lowering interest rates further," the government
needs to remain vigilant "and proceed cautiously."

Ouattara said the greatest economic challenges now confronting
the Habibie government include the reform of Indonesia's
fractured banking system and debt-laden corporate sector.

He stressed that Indonesia's Bank Restructuring Agency must be
permitted to operate independently while the central government
should focus its efforts on accelerating the recapitalization of
stricken banks.

"The government must expedite regulatory approvals for
restructuring and take further steps to strengthen the capacity
of the judiciary to implement the bankruptcy law," Ouattara said
of corporate reform in Indonesia.

Since the economic crisis in Indonesia surfaced last year, the
IMF has promised around $11.70 billion in loans to help the
wounded Asian tiger, as long as the government sticks to a rigid
and demanding program of economic reforms.

This latest credit brings to just over $9 billion the amount
paid out by the IMF to Indonesia under the November 1997 rescue
agreement.

Rupiah -- Page 9