Bill limits flexibility in making fiscal policy<\/p>\n
Dadan Wijaksana, The Jakarta Post, Jakarta<\/p>\n
Economists say that a clause in the newly approved state finance
\nbill requiring the government to obtain approval from the House
\nof Representatives before seeking foreign loans allows for too
\nmuch interference from legislators.<\/p>\n
Raden Pardede, director of Danareksa Research Institute, told
\nThe Jakarta Post on Sunday that such a ruling would keep the
\ngovernment's flexibility at a minimum in determining its fiscal
\npolicies.<\/p>\n
"It will certainly limit the government's flexibility, which
\nis not good. I personally think that the clause is unnecessary
\nbecause seeking House approval has proved time-consuming.<\/p>\n
"The idea that all foreign loans should be accountable, yes I
\nagree with that. But, not like this," Raden said.<\/p>\n
He was commenting on Article No. 23 of the state finance bill,
\nwhich stipulates that the government can obtain loans or grants
\nfrom foreign countries or institutions with the approval of the
\nHouse. The bill in question was approved last week at a plenary
\nsession and now awaits President Megawati Soekarnoputri's
\nsignature for enactment.<\/p>\n
The inclusion of the clause was apparently based on the
\nnecessity to limit the country's foreign debts at a safe level,
\nthus making it easier to control them.<\/p>\n
"I know that the clause was meant to make the nation's foreign
\ndebts more controllable. What needs to be stated in the law is a
\ngeneral guideline, not a specific one like this. This will
\nfurther slow down the government's actions," Raden went on.<\/p>\n
As of December last year, the country's total outstanding
\nforeign debt stood at about US$73 billion.<\/p>\n
The bill refers to all foreign-based loans, including loans
\nthat are not intended for budgetary purposes. Previously,
\napproval from legislators was not a must.<\/p>\n
Most of the foreign loans are intended to finance the state
\nbudget deficit. The loans come from the Consultative Group on
\nIndonesia, a grouping of the country's traditional donors.<\/p>\n
But the money coming from the International Monetary Fund
\n(IMF) is not for budgetary purposes.<\/p>\n
Under the IMF-government agreement, loans from the IMF cannot
\nbe used for purposes other than to strengthen the country's
\nforeign reserves, something that is beneficial to help strengthen
\nthe rupiah.<\/p>\n
Raden further viewed the inclusion of the clause as
\ncounterproductive, as it placed the House in a more powerful
\nposition, making it the center of every decision.<\/p>\n
Sharing Raden's view, Citibank economist Anton Gunawan said
\nthat the move only confirmed suggestions that the House wanted to
\ntake over part of the executive's work.<\/p>\n
"It will only further slow down the government's moves. It's
\nbeen proven that even without such a ruling, the progress of
\nvarious programs from the government has been stalled partly due
\nto the House's unnecessary interference," Anton said, citing
\nasset divestment and the privatization program as examples.<\/p>\n
Not only will seeking House approval take a long time, but,
\nworse, it would also be subject to political wrangling between
\nlegislators, who appear to better serve the interests of their
\nrespective political parties rather than the interests of the
\npublic.<\/p>\n
Anton was cynical when he said: "If anything should pass the
\nHouse first, why don't legislators sign the LoI?"<\/p>\n
He was referring to the letter of intent between the
\ngovernment and the IMF that contains the country's key economic
\nreform program and several time-bound targets that the government
\nhas to meet quarterly.<\/p>",
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