APSN Banner

Japan to the rescue: $2.4bn

Source
Financial Review - February 8, 1999

Greg Earl, Jakarta – Indonesia has pushed ahead with its new quest for international assistance, as Japan confirmed it would provide $US2.4 billion before Indonesia holds general elections in June.

The Japanese money was the key to Indonesia plugging a $US9 billion to $US10 billion shortfall in its Budget for the financial year, which starts in April. However, it falls short of the $US3 billion that Indonesian officials had forecast.

But both Japanese and Indonesian officials said on Friday that Japan would provide more money in the middle of the year.

The package of yen-denominated loans makes Indonesia the largest recipient of the $US35 billion Miyazawa and associated funds, with Thailand, Malaysia and the Philippines having now each received $US1.5 billion to $US1.8 billion. Japan is also providing an additional interest rate subsidy to Indonesia to help reduce the cost of a $US600 million loan from the Asian Development Bank which the country had earlier taken on as part of its crisis funding.

Indonesia says it had already arranged $US4 billion in foreign budget funding, which is believed to be project funding from the major multilateral lenders rolled over from the current financial year.

The finalisation of the Japanese funding coincided with discussions with the IMF over the latest tranche of aid, and the growing pressures within Indonesia to embrace affirmative action and redistributive policies.

Indonesia's reform program suffered another blow with a dispute over how private bank Lippobank was included in the first round of banks for recapitalisation under a government-funded scheme. Parliament members on Friday demanded that the government postpone the assistance until a more transparent decision-making process was put in place.

Country