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IMF to renew loan package to help Indonesia's economy.

JAKARTA, Dec. 14 Kyodo The International Monetary Fund (IMF) said Tuesday it will reactivate the 46 billion dollar financing package it pledged to Indonesia two years ago.

IMF Asia-Pacific Director Hubert Neiss said that of the total amount pledged, nearly 10 billion dollars has already been disbursed out of the 12 billion dollar initial installments for last year.

"The rest has been canceled because a new program will start with the new government," Neiss told reporters after a hearing with leaders of the House of Representatives on the IMF's new Letter of Intent (LoI) to be signed with the government next month.

"A new pledge will be made and this will be made clearly laid out in the LoI that will be published in due time," he said.

Neiss and his delegation are in Indonesia to discuss with the government the programs the country needs to commit itself to before disbursement of new loans from the IMF are made.

The IMF has demanded the Indonesian government reduce its long-time subsidy on fuel and electricity prices, but the House of Representatives has criticized this.

"The right momentum must be sought to hike prices," said House Speaker Akbar Tanjung, who accompanied Neiss at the briefing.

Neiss declined to disclose the size of the upcoming loan the IMF will disburse to Indonesia, which is now preparing its state budget for next year.

"The precise amount is not important, because Indonesia is no longer in a balance-of-payments crisis. Indonesia's financial situation has stabilized and Indonesia's foreign exchange reserves had been replenished. So there's no emergency need for new money," he said.

But he stressed the need for more money for the next fiscal year.

"Certainly there's a need over the next fiscal year for additional inflows from foreign official sources. And that includes not only the IMF, but also the World Bank and the Asian Development Bank and bilateral governments, in particular Japan," Neiss said.

He said the upcoming disbursement of IMF loans to Indonesia would take place around the second week of January, after its board of executive directors vote on whether to reject or accept the currently debated LoI.

The LoI will lay out Indonesia's commitment to implement measures to revive its ailing economy, including the controversial subsidy reduction which the IMF and World Bank argue is necessary to produce a sustainable budget and prevent corruption, but which the government opposes for fear of triggering inflation and social unrest.

The government is set to announce its next budget in mid-January, after the Muslim celebration of Idual Fitri on Jan. 8 and 9 at the end of the fasting month. The budget will cover the calendar year 2000 starting in January, unlike previously when budgets covered the fiscal year from April to March.
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Publication:Asian Economic News
Date:Dec 20, 1999
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