In response to concerns that ruling party Golkar would misuse World Bank funds for election purposes, the Bank and IMF agreed in May to put new loans into a special Bank of Indonesia account. The government agreed not to touch the money until after the elections. The government also agreed to publish all the documentation for the loans.
Indonesian NGOs had written to the World Bank President, asking him to postpone disbursement of a $600 million Social Safety Net Adjustment Loan (SSNAL) and a $400 million Policy Reform Sectoral Loan until after the June election. They also questioned the need for more loans when the Indonesian government has found funds to arm a militia movement in East Timor, send troops to seal off the border of West Papua, and fire on unarmed demonstrators in Aceh. The NGOs called on the Bank to
“pressure the government to redirect towards poverty alleviation the tremendous amount of funds it is currently using for the repression of our civilian population.”
Some 7,000 Jakarta urban poor signed a petition stating that the Bank-backed safety-net programme is full of corruption, does not benefit the poor and is needlessly adding to Indonesia’s debt. This was supported by a demonstration calling for the halt of the programme on April 22 outside the Bank-GOI SSN “consultation meeting”. The disbursement of the loan despite strong opposition from one of its principal constituencies, appears to violate Bank operational directive 8.60 on Adjustment Lending. Government claims to have consulted NGOs in April were criticised as being unproductive and merely a cynical attempt to appear to meet World Bank conditionalities.
Since the election the IMF has judged the situation sufficiently encouraging to release a loan tranche of $450 million, and the World Bank is expected to unblock credits as well.
Indonesia is reported to be seeking US$2bn at its Consultative Group meeting scheduled for 27-28 July in Paris. The Bank says the meeting will be important for the transitional government to demonstrate its commitment to economic reform. NGOs are concerned that government officials and donors are ignoring the country’s ability to repay the mounting debts, and the consequences of adjustment for the poorest.
World Bank Vice President for East Asia and Pacific, its Managing Director and the UK Alternate Executive Director will soon visit Indonesia to meet donors, political leaders and NGOs.
NGO documents on the above, plus a critical February 1999 Country Assistance Review by the Bank’s Operations Evaluation Department, are available from the Bretton Woods Project