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.

Rupiah, stocks -- Page 11