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Wednesday, 2 February, 2000, 14:57 GMT
Indonesia reaches deal with donors

The financial crisis left the economy in turmoil The financial crisis left the economy in turmoil

International donors have pledged to rapidly increase aid to Indonesia, despite the current political turmoil in the country.

The donors, including the World Bank and many Western countries, also made strong statements of support for the new democratically elected government of President Abdurrahman Wahid.

James Wolfensohn: World Bank is sympathetic James Wolfensohn: World Bank is sympathetic
After a two-day meeting held for the first time in Jakarta, the international donor group for Indonesia pledged $4.7bn for the next financial year, starting in April.

The money, consisting of loans and grants, will be used to help cover the budget deficit.

Donors, including the World Bank and the International Monetary Fund, had suspended aid in August after a series of banking scandals and concern about the situation in East Timor..

Hit by Asian financial crisis

The Indonesia economy was one of the worst hit by the Asian financial crisis of the late 1990s.

Many people faced starvation as the price of basic necessities like rice tripled after the currency was devalued.

Indonesia's fragile banking sector also collapsed, and many Western firms who had invested in the country pulled out.

Although the economy has now stabilised, it is still extremely fragile and heavily dependent on foreign loans.

A very substantial proportion of government revenue is used to repay massive foreign and domestic debts.

Boost for government

The decision by the international donor group to give the maximum amount expected is a major boost for Indonesia, which last year suffered the humiliation of having all loans frozen.

For now, the donors are throwing their full weight behind the government of President Abdurrahman Wahid, praising its commitment to political and economic reform and to stamping out corruption.

But a senior World Bank official also warned that the international community would be monitoring progress in his reform programmes, and he hinted at the impact of the current political turmoil, particularly the continuing rumours of a possible military coup.

He warned that all international aid would be stopped if progress towards greater democracy and human rights came to a halt.

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See also:
03 Nov 99 |  The Economy
IMF set to resume Indonesian loans
28 Oct 99 |  The Economy
Rebuilding Indonesia's economy
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
16 Dec 99 |  Business
Bank Bali deal collapses

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