IMF Approves Transfer of $1 Billion to Indonesia

WASHINGTON — The International Monetary Fund approved Tuesday a $1-billion loan payment to Indonesia under its global rescue package, rewarding Jakarta for tough reforms to rein in its worst economic crisis.

The IMF said its executive board also agreed to give Indonesia, the world’s fourth-most populous country, more favorable lending terms by shifting it into an Extended Fund Facility (EFF) program, and said the government would receive its next loan payment in one month if the reform program remained on course.

“The longer repayment period under the EFF will allow time for the reform program to take full effect, and will further strengthen the outlook for the balance of payments,” IMF Managing Director Michel Camdessus said in a statement.

The Washington-based lending agency assembled a $41-billion bailout for Jakarta in 1997, after the country’s financial markets collapsed amid the wider Asian financial crisis.

Economic conditions deteriorated in May when political and economic chaos led to the resignation of long-ruling President Suharto and his replacement by B.J. Habibie. In response to these changes, the IMF and other donors agreed in July to increase the amount of lending by $6 billion.

In exchange for the money, the new government agreed to restructure its ailing banking and corporate sectors, deregulate monopolies, privatize state-owned industries and open its markets.

Camdessus praised the government for “good policy implementation in recent months,” and was “encouraged” that Indonesia’s currency had strengthened. The rupiah has made steady gains against the dollar since July.

But Camdessus said monetary policy should remain tight to reduce inflation and boost the currency beyond current levels.

“He also stressed the importance of rapid progress with banking system and corporate restructuring to lay the foundation for a resumption of growth,” the statement said.

The IMF said the new EFF would replace Indonesia’s existing three-year, stand-by credit, which was approved by the lending agency in November 1997.

The size of the loan will not change, but the repayment period under the EFF will be substantially longer than under the stand-by.

Under this EFF, the government would receive loan payments of $900 million on Sept. 25, Oct. 25, Nov. 25, and Feb. 15, and the rest of the IMF money in smaller installments through Oct. 15, 2000.