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Saturday, November 1, 1997 Published at 15:19 GMT

Events: Indonesia: ARCHIVE

Indonesia wins IMF bail-out
image: [ Economy has suffered from currency speculation ]
Economy has suffered from currency speculation

Indonesia's economy is to be bailed out with billions of dollars from international donors.

The Indonesian Government has announced an agreement with the International Monetary Fund on a package of reforms and financial assistance to help restore confidence in the economy, which has suffered from speculative currency attacks.

Over the past three months, the value of the currency has fallen steeply and foreign investors have pulled out of the Jakarta stock market. Some businesses are in trouble after borrowing too much during the economic boom of the past five years.

[ image: Cash injection of up to $15bn]
Cash injection of up to $15bn
The three-year recovery plan is expected to involve an injection of at least $15bn. The money will come from the IMF and a number of other donors. The Asian Development Bank has said it will provide $3.5bn and Malaysia announced a big loan for Indonesia earlier in the week.

In return, Jakarta has agreed to tighten its belt, and to proceed full pace with economic deregulation. A structural adjustment programme will try to reshape the economy - often the most painful part of any IMF rescue plan.

The deal includes government spending cuts and much stricter budget discipline. Many import tariffs will be scrapped and monopolies ended. The country has also agreed to further privatisation, including - eventually - the state-owned banks.

The deal took six weeks of intense negotiations to work out and the fine details have yet to be announced.

Mixed reaction

Financial analysts in Indonesia have welcomed the abolition of the monopoly on importing wheat and soya bean products, which is thought to have kept the price of such staples as noodles and animal feed arificially high.

[ image: Timor car programme may be halted]
Timor car programme may be halted
The Government may also abandon the controversial Timor national car programme, run by President Suharto's youngest son. The scheme, which involves huge tax breaks, has been challenged by the United States, Japan and the European Union as an unfair trading practice.

Indonesia has now committed itself to accepting any ruling by the World Trade Organisation and to eliminating such tax breaks by the year 2000.

However, Indonesia has said nothing about liquidating banks with bad debts, a key requirement for an improved economy in the view of many analysts. Other questions remain over expensive projects like the state-funded aircraft industry.

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In this section

Indonesia suspends new army powers

Bloody clashes in Jakarta

Timor chooses independence

Megawati confirmed Indonesia victor

Indonesia's overdue elections

Indonesian government promises fresh elections

New president sets out his stall

President Suharto resigns

Speech that ended an epoch

A city goes mad

Indonesian parliament to ask Suharto to go

Indonesian radio reports Muslim leader's speech

Death toll reaches 200

'Total anarchy' in Jakarta

Six killed in Jakarta protest

Suharto appeals for national unity

Indonesia's ethnic tension: a chronology

New commitment to IMF deal

Indonesia's 'Annus Horribilis'