WB mulls loans for Indonesia and Malaysia
WB mulls loans for Indonesia and Malaysia
BANGKOK (Reuters): The World Bank is preparing a package of
structural adjustment loans for Indonesia under a US$1 billion
pledge made in March last year when the country was struck hard
by crisis.
A decision on that would hinge on substantial domestic
financial and political reforms, according to Jean-Michel
Severino, the bank's vice president for the East Asia region.
He told Reuters in an interview on Tuesday:
"We are preparing a package of structural adjustment loans
that might be approved by the board in a couple of months time."
"At the same time we are focusing on (Indonesian) financial
and corporate restructuring, management of social problems and
deepening of the social safety net, and finally the governance
and corruption issues in the country," he added.
"We have to have enough confidence that substantial reforms
and progress will be made on these fronts before we present this
(loans) to the board," Severino said.
"Most of this money will be disbursed right after the board
meeting, which might be in March...provided we have full
agreement with the government on enough reforms in the key
areas," he added. "As always, everything hinges on reforms.
Indonesia is due to hold national elections on June 7 even as
it grapples with severe social and economic problems facing its
huge, impoverished population.
Severino also said that the World Bank was in talks with
Malaysia on new loans to help with a fiscal stimulus for the
country, but a few more weeks of talks with the government were
needed for a final decision on the funding.
"We are in active discussions with them. Last year, around May
or June, we lent them $300 million. We are now discussing lending
to help them deal with the social impacts of the economic
crisis."
Additional funding to Malaysia would depend on complete
agreement with Malaysia on policy directions.
"We have not reached that point yet. It will take us a few
more weeks, at which point we can really say yes or no. It can be
an important amount of money," Severino added.
"The amount is not something I can tell you about as it is
being discussed. It won't be for (funding) balance of payments,
but to fund budget deficit...for fiscal stimulus," he said.
Severino said crisis-hit Asian economies needed to be very
careful after the global financial ripples created by Brazil's
recent real devaluation and float.
"All emerging economies must be extremely cautious at this
stage. It is very important...we are in a very risky environment
and the situation can deteriorate," he added.
The official said battered Thailand and South Korea, which are
seen to be on the path of economic recovery, needed to be extra
careful about reforms at this stage.
"...reforms have to be maintained and even deepened so that at
least domestic and long-term investors keep confidence in the
countries...that they are moving in the right direction."
Severino said the Asian crisis was still lingering.
"It is still there. We should not be focusing only on economic
indicators, which have been stabilizing in past months. The
underlying problems of crisis are still there.
"There is still a huge amount of private debt, corporate
restructuring and bank restructuring is not over, and it will
still take much more time to get around these problems," he said.
He predicted that barring external shocks, recession-hit Asian
countries could see some growth by end-1999.
"It will take at least a couple more...years to fully reach
corporate and financial restructuring that can allow us to say we
are beyond the crisis," he said.