Warning from IMF on militia violence


Billions of dollars in international aid to Indonesia, pledged after its 1997 financial crisis, now look likely to be used as a lever to pressure Jakarta to stop the escalating violence in East Timor.

In what observers called a highly unusual statement, the International Monetary Fund, which oversaw a $A70billion rescue package of Indonesia, today said that it and other international institutions were ``closely watching'' East Timor, and noted with concern the continuing violence.

``Indonesia, which is making progress in its program of economic reform and recovery supported by the international financial community and through the IMF, should have every interest in seeing the process in East Timor unfold smoothly and without violence in accordance with internationally recognised norms,'' it said.

Despite calls by East Timorese leaders and human rights groups, it is believed that the IMF and the World Bank think it is too early to suspend funds, but the global lending institutions could play a key role if political and diplomatic pressure on Jakarta continue to fail.

The US President, Mr Bill Clinton, has already obliquely threatened to halt the funds, in a letter to the Indonesian President, Dr B.J. Habibie, before last Monday's ballot.

Reuters today reported that the World Bank was ready to help East Timor build its post-Indonesian economy, and a delegation was expected to visit soon.

An IMF spokesman, Mr Bill Murray, said the IMF also planned to help East Timor. Indonesia is already in trouble with the global institutions over the Bank Bali scandal, which involves a payment of $US70million by the bank to a firm run by an official of the ruling Golkar Party.

The IMF has issued veiled threats to suspend further payments until that issue is resolved.

In Washington, State Department officials met over the weekend to discuss East Timor, and appeared to have been taken by surprise by Australia's Foreign Minister, Mr Alexander Downer, in his call for a ``coalition of the willing'' to send peace-keeping troops to East Timor.

A State Department official said: ``I don't want to speculate about those kinds of operations at all. Those decisions haven't been taken, so it's best not to speculate.

``It's clear that we're still asking and expecting that the Indonesian Government will do what it needs to do to re-establish security for people who are in East Timor, including the East Timorese and other international observers and military liaison officers.''

President Clinton said he was pleased that the ballot outcome was ``about as clear an expression of public opinion as you would ever expect'', but he made no mention of a peace-keeping force.

He said he was ``very concerned'' about the continuing violence and people should accept the result.