Government sees foreign debt dropping<\/p>\n
JAKARTA (JP): Finance minister Prijadi Praptosuhardjo said on
\nMonday the ratio of the government's total foreign debt to gross
\ndomestic product (GDP) was projected to drop to 65 percent in
\n2003 from the current 99 percent level.<\/p>\n
Prijadi said the government would gradually lower the amount
\nof foreign debt by paying up the loan as scheduled as the
\neconomic condition improves.<\/p>\n
\"The efforts show the government's determination in
\ncontrolling and reducing the foreign debt burden in a sustainable
\nway,\" he told the House of Representatives' plenary session on
\nthe 2001 draft state budget.<\/p>\n
Prijadi said the debt ratio in 2001 was projected to decline
\nto 86 percent.<\/p>\n
Analysts have warned that the reduction of the government's
\nmassive debt is crucial to avoid the country plunging into a
\nsecond crisis.<\/p>\n
A failure to reduce the debt burden by 2003 would create a
\ndisaster to the state budget because during that year part of the
\ndebt owed to the International Monetary Fund (IMF) and the
\ngovernment bank recapitalization bonds would start to mature.<\/p>\n
Economists estimated the burden of the 2003 state budget from
\nthe maturing bonds and the IMF loan alone could reach a whopping
\nRp 130 trillion.<\/p>\n
The government has issued more than Rp 400 trillion worth of
\nbonds to help finance the recapitalization of the country's
\nbanks.<\/p>\n
Experts also said the country would not likely get another
\ndebt rescheduling facility for debts maturing in 2003 from the
\nParis Club of creditor nations due to the higher trend in
\ninternational oil prices.<\/p>\n
Prijadi said to lower the amount of foreign loans, the ratio
\nof the annual foreign loan disbursement to GDP would be lowered
\nfrom 3 percent in 2000 to 2.6 percent in 2001 and 1.6 percent in
\n2003.<\/p>\n
Donors grouped in the Consultative Group on Indonesia (CGI)
\napproved last week to provide the country with some $4.8 billion
\nin loan to help plug the 2001 budget deficit estimated at around
\n$6 billion or an equivalent of 3.7 percent of GDP.<\/p>\n
The government hailed the CGI loan commitment but some
\nanalysts and legislators warned the loan would only create more
\nburden to the budget particularly if its conditions were similar
\nto commercial loans.<\/p>\n
Elsewhere, Prijadi said the government would not revise its
\nassumptions in the 2001 draft budget as recommended by some
\nlegislators.<\/p>\n
He said the assumptions were the result of previous
\nconsultations with the House budget committee and already reflect
\nthe real condition of the economy.<\/p>\n
\"The government thinks the assumptions are realistic and in
\nline with efforts to create a conducive climate for the
\nsustainable recovery of the economy,\" Prijadi said.<\/p>\n
The government assumes an economic growth of 4.5 percent,
\ninflation rate of 7 percent, exchange rate of Rp 7,300 per U.S.
\ndollar, international oil price at $22 per barrel and interest
\nrate of Bank Indonesia SBI promissory notes at 11 percent.<\/p>\n
Legislators have recently criticized the budget assumptions,
\nparticularly the exchange rate level and oil price assumption.<\/p>\n
Critics said the exchange rate assumption of Rp 7,300 was too
\noptimistic given the fact that the rate was now hovering near the
\nRp 9,000 level and the unstable domestic social and political
\nconditions.<\/p>\n
The oil price assumption had been seen as too conservative
\nsince the current oil price level was already at more than $29
\nper barrel.<\/p>\n
\"According to Bank Indonesia, an exchange rate of Rp 8,625 per
\nU.S. dollar at the end of September 2000 was still
\nundervalued ... Compared to 1996, the September 2000 rate level
\nhad depreciated by around 40 percent ... So there's enough room
\nfor the rupiah to appreciate to the Rp 7,300 level,\" Prijadi
\nsaid.<\/p>\n
But he admitted that domestic political stability was a
\ncrucial factor.<\/p>\n
The government proposed the draft budget earlier this month
\nand the House is expected to approve it sometime in
\nNovember.(rei)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/government-sees-foreign-debt-dropping-1447893297",
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