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. Last Updated: 07/27/2016

World Bank: Funds End If Indonesia Doesn't Act




JAKARTA, Indonesia -- The World Bank has threatened to halt funding for Indonesia if it doesn't swiftly conclude an investigation into a massive banking scandal involving the ruling Golkar Party.


"If this case is not resolved early and satisfactorily, it is difficult for us to provide budget support to the government of Indonesia," said Mark Baird, the World Bank's director for Indonesia.


The issue has sparked an uproar in Indonesia, spooked the markets and threatened its economic recovery. It has also led to calls for senior officials f including the finance minister and central bank governor f to resign.


The $80 million that went missing was disbursed by the central bank as part of a government guarantee program. The payment was supposed to compensate Bank Bali for funds owed it by a bank that closed.


The funds were sent from Bank Bali to a firm controlled by Golkar's deputy treasurer. Golkar's opponents allege the money was to be used to bankroll President B.J. Habibie's campaign to retain the presidency.


Habibie's main rival in the presidential race is Megawati Sukarnoputri, whose party won the largest share of seats in parliamentary elections in June, Indonesia's first free ballot in 44 years.


Last week, the International Monetary Fund called for an audit of the central bank to ascertain how the $83 million went missing. The IMF is leading a $43 billion program to bail out Indonesia's moribund economy.


On Tuesday, central bank deputy governor Achjar Iljas confirmed that an international firm will be allowed to audit Bank Indonesia.


The World Bank's vice president for East Asia, Jean-Michel Severino, also urged the government to swiftly look into the affair.


"It is clear that the Bank Bali case has major macroeconomic and microeconomic implications," Severino said in Jakarta. "I imagine that the World Bank can't carry on its activities unchanged if the issue isn't satisfactorily resolved."


Last year, the World Bank provided about $1.6 billion to Indonesia.


The bank says Indonesia needs to fully disclose the findings of its investigation and punish any wrongdoers.