IMF ready to give more money to Indonesia
IMF ready to give more money to Indonesia
WASHINGTON (Reuters): The international community, which
announced plans on Friday to get Indonesia's economy back on
track, could make US$40 billion available in the biggest aid
package since Mexico's bailout in 1995.
Michel Camdessus, managing director of the International
Monetary Fund, told a news conference the IMF was ready to step
in with $10 billion over three years provided Indonesia met the
terms of a comprehensive reform package.
"After 30 years of sustained rapid growth and remarkable
poverty reduction ... this program ushers in ambitious reforms
designed to equip Indonesia's economy for the challenges and
opportunities of globalization in the coming decades," he said.
"These measures should restore confidence in the Indonesian
economy and contribute to the stabilization of regional financial
markets, and I hope beyond," he said.
Other international financial institutions will also
contribute, while countries in Asia and elsewhere will provide
what U.S. officials described as a "second line of defense" --
extra funding in case things turn sour.
The package was announced after a turbulent week on world
markets, including the biggest one-day point drop in the U.S. Dow
Jones stock index and sharp share price movements in Hong Kong.
It was the third IMF bailout in Asia in four months.
Indonesia, long hailed as one of the booming tiger economies
of Southeast Asia, turned to the fund for help earlier this month
after its rupiah currency fell sharply on foreign exchange
markets.
The IMF has already loaned $1 billion to the Philippines, and
it masterminded a $17.2 billion international loan package for
Thailand, whose currency crash in July triggered the financial
turmoil across the region.
But the Indonesian package is both far bigger than the ones
that went before and structured somewhat differently from them.
A first line of loans will offer Jakarta a total of $23
billion, mostly from the IMF, the World Bank and the Asian
Development Bank.
But announcements on Friday and pledges made in the past
indicate that contributions from bilateral donors could add some
$17 billion to the package, including $3 billion from the United
States.
"If there were to be some problem and Indonesia was to
continue to meet its conditions, as a backstop ... we and a
number of nations have indicated that we'd be prepared to
consider making available support," U.S. Deputy Treasury
Secretary Lawrence Summers told CNBC Television.
Camdessus named Australia, China, Hong Kong, Japan, Malaysia,
Singapore and the United States as among those ready to
participate in bilateral efforts.
"What we need is the demonstration of solidarity by these
countries, their readiness to step in very adverse and totally
unexpected circumstances," he said.
Indonesia's obligations under the deal include promises to
restructure banks, reform the tax system and cut tariffs and
trade barriers to meet rules of the World Trade Organization, the
Geneva-based watchdog for free world trade.
Compliance with the WTO could threaten pet Indonesian
government projects, such as a plan to build a national car, an
expensive venture the government has so far promised to defend.
Camdessus said he would ask the IMF's executive board to
approve the IMF's $10 billion share of the package on Nov. 5.
Other big contributions will come from the World Bank, which
is giving $4.5 billion, and the Asian Development Bank, which is
making $3.5 billion available.
"We strongly welcome the economic reform program announced by
the government of Indonesia ... and plan to support its
implementation with a package of loans and technical assistance,"
World Bank President James Wolfensohn said.