Indonesian freeze under attack

PUBLISHED : Friday, 24 September, 1999, 12:00am
UPDATED : Friday, 24 September, 1999, 12:00am

The International Monetary Fund is coming under heavy criticism over its decision to suspend US$480 million of emergency funding to Indonesia, amid suspicions it is making a political judgment on Jakarta's policies.

The IMF, which is supposed to be strictly apolitical, earlier this month decided to delay a crucial mission which would have released the latest tranche of a $49 billion rescue package.

It said revelations over an alleged transfer of $80 million from Bank Bali to a company controlled by an official in the ruling Golkar party, caused serious concerns, and the IMF was now reassessing whether to send a mission.

However, it has also expressed 'grave concern' over the 'deteriorating situation in East Timor', an issue many members say the IMF should not be considering.

At stake is not only the $480 million tranche due from the IMF, but also additional funds - primarily from Japan, the Asian Development Bank and the World Bank, which could amount to $1.5 billion - which are dependent on the IMF giving the go-ahead for future funding.

Japan in particular is understood to be angry that Indonesia's economic recovery is now in danger because of the IMF's decision.

'Japan would like to separate the topic of East Timor,' one source said.

'It would like to consider the economic and financial issues separately in the context of the discussions of the IMF's involvement in Indonesia.' Several European countries and the United States however, believe the IMF's actions are appropriate, although IMF officials insist its decision is based primarily on the Bank Bali scandal and the implications it raises over Indonesia's bank restructuring programme.

'Even if East Timor had not happened we would still have taken action over the mission,' an IMF official said.

The IMF is now insisting the Indonesian Government hand over a copy of an investigation into the Bank Bali case that had been conducted by accountants PricewaterhouseCoopers. It is implying its decision over whether to resume its mission is dependent on evidence supplied by the report. Jakarta has so far refused.

However, another country said there were now widespread concerns among the country representatives of the IMF that the organisation may be becoming too heavy-handed over the question on whether to send a mission to Indonesia.

'There is of course a concern among IMF members about the Indonesian programme, especially since prior to the Bank Bali scandal Indonesia was doing very well. It was really catching up with the crisis-hit countries,' one IMF executive board member said.

'So much effort has been put into the Indonesian programme, so many hopes have been invested in this programme, that now everybody is concerned that because of the scandal, something may go wrong.' One country called for a quick clarification of the issue but said any hint a politically inspired decision had been made would be worrying.

'If the mission is delayed because of non-economic factors, we cannot support that kind of stance,' a spokesman for the country said.