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)