IMF promises fast action on Indonesia loan

IMF promises fast action on Indonesia loan

WASHINGTON (Reuters): The International Monetary Fund said it
could resume lending to Indonesia by early July or sooner, and
promised subsidies would remain in place to help the poor cope
with rising prices.

IMF First Deputy Managing Director Stanley Fischer told
reporters in Washington Monday that release of the fund's next
loan payment to Jakarta would depend on the outcome of an IMF
review of the battered economy.

But he added: "They need help. The economic team is extremely
constructive and I have no doubt that between us we'll work
something out."

"We're not going to hold things up in any way. So we'll just
go as fast as we can, given the technical need to get the details
right."

An IMF mission was due in Jakarta on Tuesday for talks with
the country's new government, led by President B.J. Habibie.

The IMF pulled its staff out of strife-torn Indonesia last
month and put the country's $41 billion international rescue deal
on hold amid social unrest leading to the resignation of longtime
president Soeharto and his replacement by Habibie.

But IMF officials have been increasingly upbeat since
international banks agreed last week to reschedule the country's
estimated $80 billion private sector debt burden.

Fischer said the IMF's revised program with Indonesia would
include temporary subsidies to help the poor deal with the rise
in the price of food and other essentials.

"More will undoubtedly be necessary in the way of providing
for temporary subsidies in the next phase of the program, which
is being negotiated now, given the worsening of the exchange rate
since April, when the last program was negotiated," Fischer said.

These subsidies would remain in place "until incomes catch up
or until the exchange rate appreciates," Fischer said.

He ruled out interest rate cuts, citing the risk of
hyperinflation.

"If the exchange rate in Indonesia stays where it is now and
interest rates were to be cut... you'd simply have an
unsustainable situation that would lead to hyperinflation -- and
that is totally devastating," Fischer said.

Fischer said the IMF's mission would focus on macroeconomic
issues, and that he doubted the fund's next loan payment would be
disbursed within two weeks as some had expected.

But he said the IMF board could take a vote on the next loan
installment around July 6 or sooner.

The IMF's decision is key to stabilizing the country's
economy. By approving payment, the IMF would clear the way for
other lending agencies to disburse their loans for Indonesia.

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