Indonesia wins $5.3 bln aid, promises reforms

TOKYO, Oct 18 (Reuters) - Indonesia won a $5.3 billion aid package on Wednesday needed to plug its gaping budget deficit, promising in return to continue economic reforms and bring order to volatile West Timor.

The pledge had been widely expected despite criticism by the World Bank and other major donors of Jakarta's lack of progress in calming the situation in West Timor, where three U.N. workers were murdered by pro-Jakarta militias last month.

The Consultative Group for Indonesia (CGI), chaired by the World Bank, pledged an expected $4.8 billion in aid for 2001 and said it would add $530 million in technical assistance grants to Jakarta.

Indonesia needs the aid, which will be available in a mix of loans and grants, partly to help it plug a forecast budget deficit of nearly $6 billion next year.

"We remain committed to resolving the security challenges in West Timor, and many steps to address this matter have already been taken," Rizal Ramli, Indonesia's chief economics minister, said in the statement.

Japan, Jakarta's biggest single donor, pledged an extra 49.6 billion yen ($460 million) in fresh loans to be made available over the next few years.

The World Bank said donors had been satisfied with Indonesia's commitment on West Timor, and said Jakarta had promised to continue structural reforms in line with its letter of intent to the International Monetary Fund.

"One message that emerged strongly was the critical importance of keeping the reform programme -- as described in the government's letter of intent with the IMF -- on track," said Jemal-ud-din Kassum, the Bank's vice president for East Asia and the Pacific.

Separately to the CGI aid, the IMF is engaged in a bailout programme for Indonesia's balance of payments in which it sets economic and reform targets in return for aid.

The World Bank said Jakarta had also set out a clear poverty reduction strategy and committed itself to further legal and judicial reforms.

Economists had said the aid was a virtually certainty as donors were worried that a refusal would jeopardise the strategically important country's fragile recovery and their own economic interests.

More on CGI meeting