IMF likely to resume financial aid to RI soon

IMF likely to resume financial aid to RI soon

WASHINGTON (Dow Jones): The International Monetary Fund's
executive board is expected next week to back resumption of
credit outlays to Indonesia, although the initial outlays are
likely to total around $1 billion a month, monetary sources said
Monday.

The officials, speaking to Dow Jones Newswires on condition of
anonymity, said there isn't any reason at this time to expect a
further delay in credit outlays to Indonesia.

However, one source said that program implementation isn't yet
seamless, and if there are signs Indonesia is backpedaling on
commitments to the fund it is likely that the institution's
executive board would again suspend credit disbursements.

"I'd be very surprised if it turns out we don't elect to go
ahead with a credit outlay next week," the source said, when the
IMF's 24-member board reviews Indonesia's program on May 4.

The IMF delayed a $3 billion credit outlay in March over
Indonesia's failure to implement key terms of its agreement with
the IMF.

The suspension caused the Manila-based Asian Development Bank
to withhold disbursing its $1.5 billion loan to Indonesia aimed
at reforming and strengthening the country's financial and
banking sectors.

However, an ADB official said in Geneva on Monday that the
bank is ready to disburse the first tranche of a $1.5 billion
loan to Indonesia, but is waiting for the International Monetary
Fund to take the lead.

The ADB is holding its annual meeting in Geneva through this
week. The gathering brings together senior central bank and
finance officials from the ADB's 56 shareholder countries.

The ADB loan supports the IMF's rescue package for Indonesia,
which requires sweeping reforms to the country's trade, industry
and energy sectors.

Exactly when the loan's first tranche will be made available --
and how much this will be -- remains unclear, but ADB officials
believe little now stands in the way of the loan finally going
through.

An ADB official stressed the loan's first tranche won't be
disbursed until the IMF makes its first payment to Indonesia. But
the bank's board is prepared to meet this week to agree in
principle to unlock the loan.

Under a revised program agreement reached earlier this month,
Indonesia is subject to monthly performance reviews versus
quarterly reviews under the initial IMF program. And while the
IMF hasn't announced a new disbursement schedule, it is likely
that the delayed credit, and subsequent tranches, will be split
into thirds.

Indonesian financial markets were roiled Monday by speculation
that the IMF will continue to hold up disbursements from the
existing $10.1 billion standby credit arrangement when its board
reviews the new program terms next week.

The speculation has focused around the dismantling of
Indonesian cartels and monopolies with close ties to the Soeharto
family, in particular. And while these issues could well remain
contentious, the signals from Washington are that there is
forward movement by Indonesia on implementation of badly needed
economic reforms and there isn't yet a reason to hold up outlays
further.

Dismantling of monopolies isn't seen as a minor point,
however. And IMF officials have underlined that Indonesia's
monthly monitoring is deliberately designed to keep pressure on
the government to reform.

At the same time, the IMF and Indonesia have reached
understandings at this stage that require some positive response
from the institution, officials have said. For that reason,
credit is expected to resume.

"We're at a point where there are a lot of little things
happening," an international monetary source said. "There's a
minor flare-up a day."

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ADB -- Page 9