Joanne Collins and Soraya Permatasari, Jakarta – International donors threw crisis-hit Indonesia a generous lifeline of $3.73 billion in aid on Thursday after one senior official bemoaned the need to "beg" for funds he said might be pilfered.

Underscoring growing wariness over Indonesia's foot-dragging on economic reforms, the World Bank said $1.3 billion was conditional on a major boost in policy implementation. "Of this [aid], $1.3 billion will be tied to significant progress on policy performance...," Jemal-ud-din Kassum, the bank's vice president for the East Asia and Pacific region, told a news conference after a two-day meeting of donors in Jakarta.

For Indonesia's 2002 requirements, donors pledged a total of $3.14 billion in aid. An additional $586 million in technical assistance grants and programme loans was also pledged for the next few years.

There was some confusion, however, over the $586 million. A World Bank official said he was not aware of the extra money and the government gave no specific timeframe for its disbursement.

Earlier, national planning agency head and former chief economics minister Kwik Kian Gie delivered a typically blunt message to donors, saying the country's huge debt levels had exceeded safe limits and warning some of the money might end up in the wrong hands.

Money may go astray - warning

Kwik also criticised creditors for setting wrong priorities when funding projects across an impoverished nation that was a darling of the donor community for decades until the Asian financial crisis of the late 1990s.

"It is my duty as a government official to present to you our policy and progress on the effective use of foreign aid. On the other hand I feel totally embarrassed to be confronted with the task to justify an activity which essentially amounts to begging for debt on behalf of our nation," Kwik said in a speech.

"I cannot promise you that some of this new debt will not be corrupted again as it has been in the past," added Kwik, who has cabinet rank and is close to President Megawati Sukarnoputri.

Indonesia's total foreign debt stands at some $140 billion, the same as its gross domestic product. The planning agency has a key role in coordinating foreign borrowing. Last week, Megawati warned Indonesians the country's ability to repay its debts was reaching a dangerous limit.

Foreign investors and local financial markets are keeping a close eye out for any sign Jakarta will show resolve in tackling the vested interests opposed to privatisation and efforts to eradicate graft that remains endemic.

The World Bank had previously said Jakarta would ask for $3 billion to $4 billion during the meeting of foreign donors, held at a time of growing concern over Indonesia's failure to kickstart economic reform and revive investor confidence.

Part of the fresh funds will be used to finance an expected 2002 budget deficit of 2.5 percent of GDP. The deficit this year is forecast at 3.7 percent of GDP.

The World Bank warned Indonesia on Wednesday it had six months to convince investors it was serious about implementing economic reforms, and the government cautioned it would struggle to meet next year's economic targets.

Donors under the umbrella of the Consultative Group on Indonesia (CGI) pledged $4.8 billion in loans last year, but only $2.6 billion has been disbursed. The World Bank has said that shortfall could be explained by growing frustration at Indonesia's lagging reforms but was also recognition from both sides that Jakarta could not continue to rely on hefty injections of foreign aid.

Kwik said loans to Indonesia had not been used effectively for decades. "Our total stock of debt has exceeded all limitations of sustainability and prudence ... Please realise that the loans that you are about to provide are loans that are given under duress and provided in a corrupt environment," Kwik told the donors. "Too often, projects are driven by creditors' needs and not Indonesian priorities."