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.