WB vows conditional support for Indonesia

JAKARTA (JP): The World Bank pledged on Thursday to help finance Indonesia's 1999/2000 budget deficit estimated to reach 6 percent of gross domestic product.

World Bank vice president for East Asia and the Pacific region Jean-Michel Severino, however, said that its support would hinge on the country's consistent implementation of the economic reform program.

"We have a support plan for budget deficit in Indonesia, but this support as usual will be on condition of the progress of the reform ... this fiscal and next fiscal year as well," he told reporters after meeting President B.J. Habibie together with the Bank's newly appointed country director for Indonesia Mark Baird and outgoing country director Dennis de Tray.

Indonesia is expected to need a total of US$10 billion in foreign loans to finance its budget deficit in the 1999/2000 fiscal year starting April.

The government has said it already has $4 billion in project loans, while the remainder is yet to be secured.

The Coordinating Minister for Economy, Finance, and Industry Ginandjar Kartasasmita has said that Japan, the World Bank, and the Asian Development Bank -- traditionally Indonesia's major lenders -- were expected to provide the further $5 billion needed in foreign loans.

Ginandjar recently visited Tokyo to ask for part of the $30 billion Miyazawa aid program promised by Japan last year to help revive crisis-hit Southeast Asian nations.

The Consultative Group on Indonesia (CGI) said last week after a meeting here that Indonesia's major donor countries and institutions would continue to provide financial support only if the government consistently implements its reform program within a framework of sound macroeconomic policy.

Uncertainties over the government's reform program -- designed together with the International Monetary Fund -- had reemerged recently following the House of Representatives' opposition to the costly banking recapitalization plan proposed by President Habibie.

Severino said the meeting with Habibie mostly focussed on the bank's continuing support for the country's reform programs.

"We spend most of our discussions on the World Bank, which is supporting the reforms in Indonesia and helping in pushing ahead with the financial sector reform, the corporate restructuring and the social safety net, as well as the governments anticorruption policy," he said.

He said the bank was preparing a loan package to support the social safety net program, but that this needed further discussions with the government to improve the management, efficiency, and transparency of the program, which has been designed to help the poor in surviving the 18-month-old economic crisis.

The bank reported in the recent CGI meeting that the social effects of the crisis have been less dramatic than were earlier estimated.

"People in urban areas are hurting more than those in the rural areas and people on Java appear to have borne more of the brunt of the crisis than those on other islands," the bank said in its latest study on the social impact of the crisis. (rei/prb)