IMF and Bank failed to spot Indonesia corruption

15 September 1999

The International NGO Forum on Indonesian Development (INFID) has criticised the Bank and Fund for failing to properly supervise the use of loan funds which were intended to help refinance the shattered banking sector.

The criticism has been prompted by allegations of corruption involving the Indonesian Bank Restructuring Agency (set up and financed by the IMF), Bank Bali, and the ruling Golkar party.

INFID claims that the IMF, World Bank and the Asia Development Bank “must bear some of the responsibility for the Bank Bali scandal”, and has called for the three bodies to immediately delay or halt further aid disbursements until a new Indonesian government is formed following June’s parliamentary election. The Bank appears to be back-tracking on earlier threats to halt its lending-programme, but the IMF has threatened to suspend its review of the economy which is a prerequisite for the next disbursements of funds.

The scandal comes just weeks after international donors agreed to give the Indonesian government US$5.86bn based on the government’s commitment to economic reform and addressing corruption.