WB, ADB delay aid to Indonesia, Japan goes ahead
WB, ADB delay aid to Indonesia, Japan goes ahead
TOKYO (Agencies): The World Bank will delay a one-billion- dollar loan and the Asian Development Bank its US$1.5 billion aid to Indonesia until the country makes clear reform efforts, senior bank officials said in Tokyo and Manila yesterday on the day President Soeharto was reappointed to power.
The loan will only go ahead when Indonesia meets the reform criteria laid down by the International Monetary Fund as part of its bailout package, said Mark Malloch Brown, vice president of the World Bank's external affairs department.
The delayed structural adjustment loan is the first tranche of $2 billion from the World Bank to be offered this year. The bank is still drawing up plans for an additional $500 million in food and drug aid.
"The funds which are part of the IMF package are tied to the IMF package remaining on track and so the structural adjustment loan we have been working on for Indonesia is delayed," Brown told a news conference here.
The IMF sent shockwaves through the Indonesian financial community on Friday with an announcement that its review of Jakarta's compliance with an IMF reform program could not be completed by March 15 as planned.
The review is necessary for the release of a second installment of IMF financial assistance -- worth $3 billion -- to help restore stability and confidence to the Indonesian economy.
"While we can be cautiously optimistic about the progress made by the rest of the region, still much hangs by the thread of successful stabilization in Indonesia and there obviously the signals are very, very mixed," Brown said.
"At this point the crisis is more political than economic in character," he added.
"President Soeharto is one of the great political survivors of this region, or any region. Any statesman who is consumed by making sure the achievement of 32 years is not washed away in bad mistakes over a few months is always going to be open to making the right decisions and getting reform back on track," he said.
The Asian Development Bank (ADB) also said in Manila that it was delaying the disbursement of a $1.5-billion loan to fund financial reforms in Indonesia amid Jakarta's stand-off with the IMF.
The ADB loan, for a financial governance reform program, was intended to support the standby arrangement between the IMF and Indonesia.
Japan
However, officials in Tokyo said yesterday Japan has no plans to delay its bilateral aid (development assistance) program for Indonesia but may be forced to do so if the global financial community joins the IMF in postponing rescue payments.
Foreign Minister Keizo Obuchi said Tokyo had no plans to suspend its multi-million-dollar aid program for Jakarta, which is separate from the IMF rescue program.
Japan will disburse its 20 billion yen ($157 million) loan to Indonesia in line with a schedule for World Bank and Asian Development Bank (ADB) loans, a senior Foreign Ministry official said yesterday.
"The loan, aimed at alleviating the pain of Indonesia's structural adjustment efforts, has been set to be disbursed along with the lending by the World Bank and the ADB," the official said.
But senior officials said the aid from Japan, known as official development assistance, could be threatened if the World Bank and Asian Development Bank (ADB) joined the IMF in postponing rescue package disbursements.
"We have to keep in step with international monetary institutions," a Japanese foreign ministry official said.
"If other international institutions like World Bank and the ADB act in concert with the IMF, we will have to follow suit," the official said.
Vice foreign minister Shunji Yanai also told a news conference on Monday: "We need to consider the reform agreement between the IMF and Indonesia when we proceed with assistance."
"Japan may find it difficult to provide assistance," if Indonesia fails to commit itself to the reform program, Vice International Trade and Industry Minister, Osamu Watanabe, told a news conference on the same day.
U.S. pressures
Meanwhile, the United States on Monday kept up the pressure on Indonesia, insisting that Jakarta had to prove that it was committed to IMF economic reforms.
"We believe that the government of Indonesia needs to demonstrate through its actions and through the work of its leadership that it remains fully committed to the IMF program, that it understands the importance of promulgating and moving forward with the economic reform measures that have been a condition for IMF assistance," said White House spokesman Michael McCurry.
"And we think there is considerable work to do and we will continue to urge the government to do that work," he said. U.S. officials have repeatedly urged President Soeharto to set aside plans to establish a special board to manage a peg between the local currency, the rupiah, and the dollar and to concentrate instead on complying with IMF reform measures.