IMF may not release $3b payment until April

IMF may not release $3b payment until April

WASHINGTON (Reuters): The International Monetary Fund said on
Friday its board would not discuss Indonesia's economic reform
program before April, effectively delaying a $3 billion payment
expected by March 15.

An IMF spokesman said the IMF hoped a review of the reforms
could be completed soon after changes to "macroeconomic
assumptions" had been agreed with a new government team.

"Assuming this can be achieved, and given the existing IMF
procedures, the date of the executive board discussion of the
conclusion of this program review could not be expected before
April," the spokesman said.

He gave no details of what changes might be needed and what
other conditions needed to be in place to approve the payment.

An IMF team is currently assessing the situation in Indonesia
and its review will determine whether the IMF board approves a
second payment on its $10 billion loan, the largest single
element in a $40 billion international rescue deal.

The IMF said when it approved the deal last November that the
decision on a second installment was due by March 15. But there
has been speculation that the deadline would be set back while
long-serving President Soeharto named a new government.

Monetary sources said it would be hard to complete the review
of the program until the government was appointed. The review
will also set targets for the coming months.

Financial markets have been worried about Soeharto's
commitment to the reform program and about the possibility that
he plans to peg the rupiah to the dollar and link cash in
circulation to central bank reserves.

The IMF and the donor states contributing to the rescue
package say that Indonesia's economy is too weak to cope with the
demands of the system, which is known as a currency board.

They say Indonesia must stick with the IMF reforms.

"The key is always with Indonesia ... that there be sustained
implementation of the reform program," U.S. Treasury Secretary
Robert Rubin told reporters on Friday.

The harsh conditions of the IMF rescue deal have already
driven prices sharply higher, leading to riots and looting in
several parts of Indonesia.

In Jakarta, a leading business figure downplayed the
significance of the delay.

Tanri Abeng, a member of the Economic and Finance Resilience
Council formed by Soeharto to deal with the crisis, attributed it
to "technical matters".

He believed the IMF administrators were awaiting the
government's announcement of the new cabinet later this month
before they disbursed the $3 billion fund.

He added, however, that the IMF should specify on what points
Indonesia had been inconsistent if it was dissatisfied with the
government's reform commitment.

"I question the IMF's position which has not specified ...
their points. If they tell (us), we can fix it," he said.

The White House said Friday President Bill Clinton is
satisfied Indonesia got a strong U.S. message it must comply with
IMF reforms, but he will wait to see if it is heeded.

Clinton was debriefed Thursday by his special envoy former
vice president Walter Mondale about his trip to discuss the
Indonesian financial crisis in Jakarta this week, his spokesman
said.

"The discussion indicated that the message was forcefully
delivered and we'd have to wait and see now whether the
government and the president (Soeharto) follow through," he said.

"We will continue to say that we encourage the government of
Indonesia to meet its obligations under the IMF program," he
added.