Government likely to be grilled at CGI meeting<\/p>\n
By Reiner S<\/p>\n
JAKARTA (JP): The government will meet on Monday with donors
\ngrouped in the Consultative Group on Indonesia (CGI) in a bid to
\nmaintain crucial financial support to help the ailing economy.<\/p>\n
The international donors will likely intensely quiz the
\ngovernment during the two-day meeting here over the
\nimplementation of various reform programs promised last year, and
\nthe latest development in the economy, particularly concerns over
\nthe state budget deficit.<\/p>\n
The meeting, to be attended by local representatives of the
\ndonors, is being held at a time when embattled President
\nAbdurrahman Wahid faces the prospect of being impeached over
\nalleged financial impropriety.<\/p>\n
\"The government must give a convincing explanation to win the
\nsupport of the CGI,\" prominent economist Sri Mulyani said. \"Solid
\nsupport from the International Monetary Fund is also crucial,\"
\nshe added.<\/p>\n
The CGI groups multilateral donors and major countries, of
\nwhich the largest creditors are the World Bank, the Asian
\nDevelopment Bank (ADB) and Japan.<\/p>\n
Coordinating Minister for the Economy Rizal Ramli said that
\nMonday's meeting would basically focus on reviewing the
\nimplementation of various reform programs promised by the
\ngovernment last October in Tokyo and on future measures to carry
\nout the agreed programs.<\/p>\n
The donors will then reconvene in November, possibly in
\nYogyakarta, to decide on the size of their new loan pledges help
\nfinance the 2002 state budget.<\/p>\n
The donors pledged about US$4.8 billion in Tokyo last year to
\nhelp finance the current 2001 state budget deficit.<\/p>\n
It is not clear whether the donors will delay the disbursement
\nof the pledged loan if they are dissatisfied with the result of
\nthis week's meeting, but observers said that such a prospect was
\npossible.<\/p>\n
The donors are expected to review government policies and
\nstrategies, particularly on poverty alleviation, illegal logging
\nand good corporate governance.<\/p>\n
In a bid to win the hearts of the CGI members, the government
\nrecently set up a special poverty reduction agency in charge of
\ndeveloping operational strategies for poverty alleviation. The
\nagency is headed by noted agronomist H.S. Dillon and is
\nsupervised by an interministerial committee chaired by Vice
\nPresident Megawati Soekarnoputri.<\/p>\n
\"If we don't make preparations, this will become a serious
\nproblem at the pre-CGI meeting,\" Rizal said, referring to the
\ntwo-day meeting.<\/p>\n
IMF Asia Pacific deputy director Anoop Singh, who is currently
\nhere to head a team in reviewing Indonesia reform programs, is
\nexpected to brief the donors on the implementation of the fund-
\nsponsored economic reform program.<\/p>\n
The World Bank and ADB have insisted that future financial
\nsupport for the country will depend on whether the government can
\nwin the support of the IMF.<\/p>\n
The main focus of the current talks between the government and
\nthe IMF is the revision of the 2001 state budget amid the
\nweakening of the rupiah and rising domestic interest rates.<\/p>\n
The government earlier said that the current state budget
\ndeficit could exceed 5 percent of gross domestic product due to
\nthe weakening rupiah and increasing interest rates compared to
\nthe initial projection of 3.7 percent of GDP. This means that the
\ngovernment would have to come up with additional funding of
\napproximately Rp 35 trillion ($3.5 billion).<\/p>\n
But a finance ministry senior official surprisingly said on
\nSunday that the government would maintain the deficit at the
\ninitial level of 3.7 percent of GDP. This was confirmed by Rizal.<\/p>\n
No detailed measures to achieve the target have been
\ndisclosed, except that the government plans to raise income tax
\nrevenue, accelerate the privatization program and asset sales,
\ncut spending and ask resource-rich provinces to help finance
\ncentral government programs.<\/p>\n
Sri, however, said that some of the measures were nearly
\nimpossible to realize, particularly raising tax revenues amid the
\ncurrent economic difficulties.<\/p>\n
Sri said that the unclear measures to solve the deficit
\nproblem had contributed to Friday's drop in the exchange rate of
\nthe rupiah to near the Rp 12,000 per U.S. dollar level.<\/p>\n
\"They (the donors) will quiz the government over this issue,\"
\nshe said.<\/p>\n
\"If (finance minister) Prijadi can come up with a credible
\nexplanation, they will give their support. If the proposal is not
\nconvincing, they will stay away,\" said Sri, a senior economist at
\nthe prestigious University of Indonesia.<\/p>",
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"sponsor": "Okusi Associates",
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