IMF moves closer to big Indonesia loan deal

IMF moves closer to big Indonesia loan deal

WASHINGTON (Reuters): The International Monetary Fund (IMF) moved closer to a multi-billion dollar bailout for tiger economy Indonesia on Thursday and an IMF official said only a few details still needed to be sorted out.

"Discussions with Indonesia are almost wrapped up," said the official, who asked not to be named. "We are very, very close. There are a few Is to be dotted and a few Ts to be crossed."

In Jakarta, Bank Indonesia's Governor Soedradjad Djiwandono told reporters yesterday Indonesian officials were still meeting with an IMF-led team to finalize details for an aid package.

Asked when details would be available, the IMF official in Washington said: "I think the general feeling is that we will have something in the next few days."

Other monetary sources said it was hard to put a figure on the likely size of a loan agreement, but one said Jakarta was seeking a fairly large amount. "It's going to be a pretty big package," he said.

Figures bandied around Washington's international financial institutions went as high as US$10 billion, he added.

But a second source said a lot of figures had been mentioned in the debate about how much money Indonesia would need. "It is a very hard call. It is hard to know why there was such a massive loss of confidence," he said.

Indonesia, following in the footsteps of Thailand and the Philippines, asked for IMF assistance on Oct. 8 after the rupiah currency came under sustained pressure and officials there have also said that the talks are going well.

The negotiations, like those for a $1 billion IMF credit in July to the Philippines and a $17.2 billion international bailout for Thailand in August, are using accelerated rules drawn up after Mexico sought help in 1995.

The Washington experts said high Indonesian foreign exchange reserves might encourage the IMF to offer a smaller package. But concern that a large package would be needed to reassure jumpy markets could point to a larger deal.

But the sources, noting markets were looking for concrete action rather than just promises, said it would be wrong to move too fast. "Although the fund is doing this under the so-called emergency procedure, it would be a mistake to rush the issue," said one.

Mexico, which has repaid the United States and given back some IMF funds ahead of time, never used all the money on offer and monetary sources have said Indonesia's problems are as much about confidence as about cash.

Policies are already in line with those international financial organizations would like to see, although some Washington sources admit the IMF is worried about the cost of grandiose projects, like the one to build a national car.

"There are various recommendations, some of them involving interests which are quite close to the ruling family -- the national car, the aircraft industry," the first source said.

"The government has to do some hard thinking about trading off ideas like that against economic and financial reality."

Indonesian Minister of Industry and Trade Tunky Ariwibowo said in Jakarta on Thursday Indonesia would push on with the national car project, under which local firm Timor Putra Nasional and South Korea's Kia Motors are cooperating to build a car.

The Indonesian firm is headed by the youngest son of President Soeharto.

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