Rubin says loans to Jakarta have adequate safeguards
Rubin says loans to Jakarta have adequate safeguards
WASHINGTON (AP): The White House told Congress on Wednesday that US$1.1 billion in new World Bank loans to Indonesia will be issued with adequate safeguards to assure that they are not used to buy votes in that country's upcoming elections.
The United States earlier this week forced a 48-hour delay in considering the loans out of concern that it would appear the West was taking sides in advance of Indonesia's first elections since the ouster of President Soeharto a year ago.
Treasury Secretary Robert Rubin told the Senate Appropriations foreign operations subcommittee on Wednesday that the administration believed it had the proper assurances that the money would go for the purposes intended, including providing a social safety net to help the country's poorest people deal with the devastating recession Indonesia has suffered since its economy was toppled by currency instability in the fall of 1997.
"It is very much in the opinion of Europe, the United States Treasury and others ... that it ought to be held up until after the election," Rubin told senators.
However, a senior Treasury official later issued a clarification of Rubin's remarks, saying the secretary misspoke in saying all of the $1.1 billion in loans would be withheld until after the June 7 vote.
The official stressed that the bulk of the loans would not be available for use in the country until after the election and all the loans would be tied to strict requirements on how the money can be used.
Sen. Mitch McConnell, chairman of the subcommittee, told Rubin he agreed with critics who charged that approval of the loans could interfere with the elections.
"I think disbursement at this particular moment for these projects would be perceived as offering political support to the incumbent candidate in the June elections," McConnell said. "I would urge you to encourage the bank to delay disbursement until after the elections to avoid any charges of political manipulation."
Rubin said the administration supported this approach and the United States was satisfied with the assurances it was receiving from the World Bank on the loans. The multinational lending agency is scheduled to take up the $1.1 billion in loans to Indonesia again Thursday and approval was expected with the extra conditions.
Indonesia became eligible for additional support from the World Bank after reaching agreement with the International Monetary Fund (IMF) on new economic reform measures to pull the country out of the recession.
The new loans, in addition to those from the World Bank, include $460 million in support from the IMF and $500 million from Japan.
In Jakarta, the International Monetary Fund's official said the Fund's executive board is set to meet to approve more of its loan package for Indonesia on June 7, the day the country goes to the polls in landmark parliamentary elections.
The move means the IMF will not release funds to Indonesia before the elections.
The IMF's Indonesia representative Kadhim Al-Eyd said the board meeting was set for June 7 purely due to scheduling reasons and not any wish to delay disbursing funds during the Indonesian election campaign.
"We are following our normal procedures given the circulation period required," he told Dow Jones Newswires. "The board is tentatively expected to meet on June 7."
The IMF itself will release around $460 million, while the Japanese government - which has pledged $2.4 billion to Indonesia through the Miyazawa initiative - has said it will release funds for Indonesia every time the IMF does.
"We will release $460 million depending on the exchange rate," Al-Eyd said.
The World Bank Tuesday approved two loans totaling $400 million and is expected to approve two additional loans at a board meeting Thursday, although these also may not be released until after the polls reflecting concerns both in the U.S. and in Indonesia that the funds might be misused for political purposes during the election campaign.