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.