WB, IMF warn Indonesia of possible aid suspension

WB, IMF warn Indonesia of possible aid suspension

JAKARTA (JP): The World Bank and the International Monetary
Fund (IMF) warned the Indonesian government on Wednesday that
failure to restore stability in riot-torn East Timor may lead to
a suspension of financial aid to Indonesia.

In its first official statement since East Timor voted in
favor of independence last week, the World Bank indirectly linked
the realization of a US$6.9 billion aid package pledged by the
Consultative Group for Indonesia in July to a peaceful resolution
in the troubled territory.

The World Bank chairs the CGI, which groups Indonesia's major
donors.

"At the CGI meeting in July, the Indonesian government told
donors 'rest assured that... we are determined to implement our
part of the agreement and give our full support to the operations
of the United Nations in East Timor,'" the World Bank said.

Following through on the statement made at CGI is a critical
component of the policy commitment of the government of
Indonesia, setting the context in which the program of
international assistance agreed in July is to be realized, the
World Bank said.

The World Bank urged the Indonesian government to act
decisively to enable order to be restored to East Timor and to
continue implementing the next steps of the transition process in
accordance with the existing agreement.

"The East Timorese -- all of those who voted -- took a brave
step in going to the polls and they deserve to see the results of
the ballot implemented in full, without violence and in an
orderly fashion," the bank said.

The bank also promised to help the people of East Timor in the
reconstruction of the territory.

"We have already announced plans to help build the capacity of
East Timorese groups to lead reconstruction planning efforts, and
to work with our international partners in evaluating priority
needs and mobilizing funds for reconstruction."

The World Bank's comments follow similar words of warning from
the IMF, which said Indonesia had "every interest" in ensuring
the process in East Timor unfolds smoothly and without violence.

The IMF said it would decide soon whether to go ahead with a
planned mid-September visit to Indonesia, but it is worried about
the economic program, the Bank Bali case and the situation in
East Timor.

"The IMF is reviewing the situation in Indonesia and will
shortly make a decision on whether to send a mission to Jakarta
which was previously scheduled for mid-September," IMF External
Affairs Director Thomas Dawson said in a statement.

Dawson said the IMF discussed its concerns over economic
uncertainties during a visit to Washington last week by
Indonesia's Coordinating Minister for Economy and Finance
Ginandjar Kartasasmita.

The IMF continues to view with grave concern the deteriorating
situation in East Timor, Dawson said, adding that Indonesia
should have every interest in seeing the process there unfold
smoothly and without further violence in accordance with
internationally recognized norms.

The IMF has arranged US$43 billion in an international bailout
fund to help Indonesia cope with the crisis. The fund pledged
some $11 billion in the aid package, of which some $2.3 billion
has yet to be approved.

If the review is delayed, this would automatically delay the
disbursement of the next installment of the aid package from the
fund, which is scheduled to release about $460 million for
Indonesia around the end of the month.

The people of East Timor voted last week in favor of
independence from Indonesia, but the situation there has
descended into chaos and violence. Indonesia imposed martial law
and a shoot-on-sight curfew in the territory on Tuesday. (hen)