News Brief: IMF Completes Review and Increases Financing of Indonesia’s Economic Program
July 15, 1998
IMF Completes Review and Increases Financing of Indonesia’s Economic Program
Alassane Ouattara, Acting Managing Director of the International Monetary Fund (IMF), said: "I am pleased to announce that in support of the Indonesian government’s economic program, the IMF’s Executive Board today approved the completion of a review of Indonesia’s stand-by credit. The Board also approved an increase in the financing under the 36-month stand-by credit by SDR 1 billion (about US$1.3 billion), to SDR 8.3 billion (about US$11 billion). Following the completion of the review, SDR 734 million (about US$1 billion), is available to Indonesia immediately, bringing total IMF disbursements under the credit to SDR 3.7 billion (about US$4.9 billion). The full amount of the additional financing approved today is to be made available before end-March 1999, in addition to the IMF resources already committed for the period.
"New financing for the program is also to be provided through an informal arrangement among bilateral creditors that involves the rescheduling of principal payments falling due or the provision of an equivalent amount of new money. Additional financing will also be made available by Australia, China, the Asian Development Bank and the World Bank. The total additional financing for the program, including the increase in the IMF stand-by credit, amounts to over US$6 billion, all of which is to be provided before end-March 1999. This comes on top of substantial external financing previously committed by multilateral institutions, and by Japan and other bilateral donors.
"In completing the review, Executive Directors commended the authorities for good policy implementation in very difficult circumstances. They welcomed the economic priorities set by the government to prevent a further economic decline, reduce inflation, and to substantially intensify its efforts to protect the poor from the worst effects of the crisis. In this connection, strengthening of the distribution system was an urgent priority. Directors also agreed that a much higher budget deficit was necessary to accommodate higher subsidies on essential items and other social spending. Continued firm control over monetary policy and rapid implementation of the reforms underway in the banking system and corporate restructuring were also viewed as policy priorities," Ouattara said.