World Bank encouraged by Soeharto's speech

World Bank encouraged by Soeharto's speech

TOKYO (Reuters): A senior World Bank official said yesterday he was encouraged by statements from Indonesian President Soeharto at his inauguration, but added that the bank's structural assistance to the region depends on an International Monetary Fund aid package remaining on track.

"I was very encouraged by Soeharto's speech," said World Bank Vice President for External Affairs Mark Malloch Brown.

In a 15-minute acceptance speech earlier Wednesday, Soeharto said: "We are being subjected to very hard economic and financial turmoils... as a nation we must tighten our belts."

But he made no mention of Indonesia's stand-off with the IMF nor of a controversial proposal he is considering for a fixed exchange rate through a currency board system, which continues to keep financial markets in a state of confusion.

Brown, speaking to Reuters Financial Television, added that there are basically two elements to the Bank's lending: "structural support, which is very much tied to the IMF package," as well as humanitarian aid.

The IMF has decided to postpone an additional bailout package of $3 billion to April or later, on grounds that Indonesia had failed to completely comply with the agreement.

Soeharto was quoted by a leader from the People's Consultative Assembly on Monday as saying that reforms in line with an agreement with the IMF to receive additional emergency funds were not in accord with the Indonesian constitution.

Brown said that as a result of IMF decision, a planned $1 billion structural adjustment loan to Indonesia by the World Bank is likely to remain on hold until the IMF package implementation is on track.

But he added that, as concerned as it is with providing for basic social needs, it is difficult for the World Bank to provide aid without a pre-existing framework of economic stability.

"It appears as though we come at this from different perspectives (from the IMF), but in fact these crises really hurt the poor, and therefore we have a very clear common goal with the IMF to guarantee their lives," he said.

"We're very solidly with the IMF on the issue of macroeconomic stability," he added.

He added that, whatever measures are finally implemented, it is essential that they restore market confidence, both domestic and international.

The longer that confidence is lacking, the harder it will be for the country to recover, he added.

In Washington, the United States said Tuesday it hoped Soeharto would appoint a new economic team that would fully implement the IMF's reform package and restore economic confidence.

"The U.S. hopes President Soeharto will choose a cabinet that includes a strong economic team that will signal its intention to implement fully the IMF economic reform program," said State Department spokesman James Foley.