WB, ADB pledge 'safety net' aid

WB, ADB pledge 'safety net' aid

JAKARTA (JP): Executives of the World Bank and the Asian
Development Bank (ADB) assured Vice President B.J. Habibie
yesterday they would closely work with the government in
overcoming the country's economic turmoil and improving its
competitiveness in the future.

The World Bank's country director, Dennis de Tray, said his
institution would provide humanitarian aid under a short-term,
safety-net program, and also encourage other donors to extend
help to the poor here.

"We have a very careful assessment of food needs,
contraception needs and hospital supports... we are prepared
with lending money on the table, but we also like to encourage
other donors to participate," de Tray said after meeting with
Habibie at Merdeka Selatan Palace.

"Indonesia is managing this process quite well but this is a
very difficult time, foreign exchanges are short and the budget
is very tight."

The government is expected to need at least US$1.5 billion
worth of essential commodities for this year, comprising $1
billion for the importation of rice, and the remainder for other
staples, medicine and hospital equipment.

Separately, the ADB's program director, Shoji Nishimoto, said
the bank would allocate up to $300 million for social safety-net
activities in Indonesia.

"Our assistance will primarily focus on restructuring and
modernizing the banking sector, but beyond that we are also
working on social safety net, basic education and health
services," Nishimoto said after his own meeting with Habibie
yesterday.

The World Bank has committed $4.5 billion and the ADB $3.5
billion to the $43 billion rescue package organized by the
International Monetary Fund (IMF) for the country last year.

The World Bank's president, James D. Wolfensohn, promised last
month to disburse $1 billion in loans for medical supplies, seeds
and fertilizer for farmers and to fund labor-intensive projects
for unemployed workers nationwide.

A dispute between the IMF and the government over the
implementation of the agreed upon 50-point economic reforms
apparently caused a delay in the disbursement.

"The World Bank plans to have a technical meeting in
Washington on April 1 to discuss with donor partners on how to
address humanitarian issues," de Tray said.

Asked about Bank Indonesia's decision Monday to raise its
benchmark interest rate to curb inflation, de Tray replied: "If
the interest rate is not raised now, the inflation rate can go up
very quickly and the rupiah can drop very substantially ...
Nobody likes a high interest rate, but right now it is essential
to stabilize the economy".

He added the high interest rate would provide breathing space
for the government as it continued its negotiations with the IMF
to develop its program. (prb)