Europe South Asia Asia Pacific Americas Middle East Africa BBC Homepage World Service Education

Front Page



UK Politics







Talking Point

In Depth

On Air

Low Graphics

Friday, September 10, 1999 Published at 20:35 GMT 21:35 UK

Business: The Economy

IMF suspends talks with Indonesia

The IMF has lent $12bn to Indonesia

The International Monetary Fund has suspended discussions with Indonesia on its economic programme there, a fund spokesman said on Friday.

"IMF management continues to keep under close review ongoing developments in Indonesia and discussions for the next programme review are on hold," said the IMF spokesman.

The BBC's Rob Watson in Washington: The IMF joins the no-confidence vote against Indonesia
The news follows earlier warnings from the IMF that Indonesia faces a loss of financial aid if it is unable to solve the crisis over East Timor.

Hubert Neiss, the IMF's director for Asia, said: "The events in East Timor are first of all a large human tragedy and the international community including the IMF cannot be indifferent to that....An IMF programme can only be successful if there is the necessary internal as well as external support to the efforts.".

He said the IMF mission to Jakarta, scheduled for later in the month to discuss the next installment of lending, was now on hold.

The IMF came to the rescue of Indonesia in 1997 after the country's currency was devalued, and its aid is still vital to keeping the economy afloat.

IMF support unleashed aid from other donors, and in all $47bn has been pledged by the West - including $25bn from the World Bank, the IMF's sister institution that funds long-term development.

On Wednesday the World Bank warned Indonesia that it was in danger of breaching the commitments it made at the last donor conferenc in July to allow a peaceful transition to independence in East Timor.

Bank scandal

The IMF also said that the continuing corruption in the country was making it difficult for its reform programme to work.

Financial markets have been rocked by the Bank Bali scandal, in which a leading Indonesian bank was accused of paying an $80m "commission" to the deputy treasurer of the ruling Golkar party in order to secure the return of some loans seized by the government.

The commission was widely seen as an attempt to fund the re-election of President Habibie. The scandal has also implicated key officials in charge of Indonesia's programme of bank restructuring, considered a key part of the economic reforms.

"It certainly it is a major case of corruption and therefore very important for the IMF. Remember, the IMF programme from the very beginning had anti-corruption measures as a major element," Mr Neiss said.

Indonesia's economy is still shrinking, and any withdrawal of foreign aid could have serious consequences, especially for the large part of the population that was forced into poverty by the crisis.

Nevertheless, analysts doubt that there will be a full-scale withdrawal of aid, which could cause a financial crisis in the rest of Asia, and possibly trigger a military coup in Indonesia.

Advanced options | Search tips

Back to top | BBC News Home | BBC Homepage | ©

The Economy Contents

Relevant Stories

08 Sep 99 | The Economy
Loans to Indonesia under threat

28 Jul 99 | The Economy
Indonesia gets $5.9bn aid package

01 Jul 99 | The Economy
Asia's crisis: The country breakdown

09 Jun 99 | The Economy
Indonesian market euphoria fades

Internet Links

International Monetary Fund

World Bank

The BBC is not responsible for the content of external internet sites.

In this section

Inquiry into energy provider loyalty

Brown considers IMF job

Chinese imports boost US trade gap

No longer Liffe as we know it

The growing threat of internet fraud

House passes US budget

Online share dealing triples

Rate fears as sales soar

Brown's bulging war-chest

Oil reaches nine-year high

UK unemployment falls again

Trade talks deadlocked

US inflation still subdued

Insolvent firms to get breathing space

Bank considered bigger rate rise

UK pay rising 'too fast'

Utilities face tough regulation

CBI's new chief named

US stocks hit highs after rate rise

US Fed raises rates

UK inflation creeps up

Row over the national shopping basket

Military airspace to be cut

TUC warns against following US

World growth accelerates

Union merger put in doubt

Japan's tentative economic recovery

EU fraud costs millions

CBI choice 'could wreck industrial relations'

WTO hails China deal

US business eyes Chinese market

Red tape task force

Websites and widgets

Guru predicts web surge

Malaysia's economy: The Sinatra Principle

Shell secures Iranian oil deal

Irish boom draws the Welsh

China deal to boost economy

US dream scenario continues

Japan's billion dollar spending spree