Japan considering $1b loan for Indonesia

Japan considering $1b loan for Indonesia

TOKYO (Reuters): Japan is considering extending US$1 billion in aid to Indonesia in the form of untied loans to help get the country out of its economic crisis, the Export-Import Bank of Japan said yesterday.

"We are considering extending a two-step untied loan to Indonesia...possibly through the Indonesian central bank," a spokesman for the bank said.

He said the bank was now working on the loan in line with a Japanese government decision on Feb. 20 to take emergency steps through trade finance to help stabilize economies of Southeast Asian nations, particularly Indonesia.

However the bank spokesman said the Export-Import Bank could not extend the loan to Indonesia before the International Monetary Fund and Jakarta agree on an economic adjustment program.

"It is necessary for us to look at the situation with the IMF," he said, adding that the bank hoped to extend the loan as soon as possible after such an agreement was reached.

A Japanese economic daily, the Nihon Keizai Shimbun, said yesterday that the loans would be extended to the Indonesian central bank to provide a source of revenue for a trade-linked financial guarantee system, under which firms having difficulties settling import payments could receive aid.

Additional emergency Japanese aid to Indonesia, which has been stalled pending negotiations with the IMF, would also be extended as soon as possible,the paper said.

Indonesia and the IMF have been engaged in discussions about an IMF-brokered economic reform package, with $3 billion due to have been disbursed on March 15 delayed by a review of Indonesian reforms.

Expectations are high that a revised economic reform agreement will be reached soon.