WB approves US$422 million in loans for Indonesia
WB approves US$422 million in loans for Indonesia
WASHINGTON (Reuters): The World Bank said on Tuesday it had approved new loans of US$422 million for Indonesia and said it could increase lending to as much as $1 billion annually if an impasse with the IMF were resolved.
The larger of the two loans, the Kecamatan development project, totals $320.2 million and is aimed at reducing poverty in 15,000 poor villages across the country, potentially helping up to 30 million rural Indonesians.
The second loan, for $102.57 million, will help bring improved health services to poor families.
The loans take World Bank lending to Indonesia for the current fiscal year, which ends this month, to $492.7 million -- just above the worst case scenario the bank envisaged when it unveiled its lending strategy for Indonesia in February.
But the Washington-based lender offered some hope that it might lend more to Indonesia in the coming fiscal year.
The bank said in a statement that reaching an agreement with the International Monetary Fund, which froze lending to Indonesia in December, could help it win more cash from the World Bank in the coming fiscal year.
The World Bank can lend up to $1 billion annually to Indonesia, but only if the country makes adequate economic improvements and shows progress on reforming its economy.
The bank said in its statement that advances on macroeconomic stability, acceleration of structural reforms strengthening of public procurement and financial management, and progress on preparing a broad-based poverty strategy could make that higher lending scenario a reality.
"The door is open for the possible transition to 'high case' status for Indonesia," World Bank Vice President for East Asia and the Pacific Jemal-ud-din Kassum said.
"The bank is prepared to move to a higher lending case, if policy performance improves. Completion of the current IMF review would be an important step in fulfilling the conditions for 'high case,'" Kassum added.
Hopes that the impasse with the IMF could be resolved soon were given a boost on Tuesday when the fund said it would resume talks about restarting its $5 billion loan program with Indonesia if the government agreed to delay a debate on controversial central bank law revisions.
Reaching accord with the IMF is seen as vital to renew investor confidence in Indonesia and also to pave the way for rescheduling billions of dollars of debt with the Paris Club.
Indonesia's parliament earlier on Tuesday urged the government to stall the central bank law debate by six months to help improve ties with the IMF.
"I believe the fund would be willing to send a mission soon if the government wishes to follow the comprehensive suggestion by the parliament," IMF senior Jakarta representative John Dodsworth told Reuters.
Dodsworth said the mission -- which would pave the way for a fresh $400 million loan -- was solely contingent on the revised laws which the IMF fears would undermine the central bank's hard- won independence.
Indonesia has already cleared two hurdles for securing fresh IMF loans: revising its 2001 state budget and dropping a much criticized plan to issue asset-backed bonds.
The biggest sticking point on the Bank Indonesia law reforms is Article 75 which stipulates the whole bank board resign once the new laws take effect. An independent report recently said the clause was a "serious mistake."