Government urged to use CGI loans for recovery<\/p>\n
JAKARTA (JP): Economists urged the government on Thursday to
\nuse the US$5.9 billion in loans pledged by the country's major
\ndonors primarily for programs to accelerate economic recovery.<\/p>\n
Sri Adiningsih, an economist at the prestigious Gadjah Mada
\nUniversity, said that part of the new loans should be channeled
\nto provide liquidity for the country's cash-strapped real sector.<\/p>\n
\"The loans should be mainly focused on restoring the economy,
\nparticularly to revive the real sector,\" she told The Jakarta
\nPost.<\/p>\n
\"Unless the real sector can be reactivated, the economy won't
\nrecover.\"<\/p>\n
Indonesia's 30 major donor institutions and nations pooled
\nunder the Consultative Group on Indonesia (CGI) pledged on
\nWednesday some $5.86 billion in new loans to help finance the
\ncurrent fiscal year state budget ending March 2000 at the end of
\na two-day meeting in Paris.<\/p>\n
Adiningsih said that although the current state budget would
\nbe heavily burdened by the government's costly bank restructuring
\nand recapitalization program, part of the new loans should be
\nused to help provide working capital for businesses, as the
\nbanking sector is still reluctant to lend money.<\/p>\n
She said that funding should be directed particularly to
\nexporters, resource-based companies, and for restructuring the
\nreal sector.<\/p>\n
The banking sector completely halted lending to the real
\nsector last year as it was badly hit by the economic crisis,
\nsending companies into bankruptcy or prompting severe cuts in
\nproduction capacity.<\/p>\n
Despite the sharp decline in the central bank benchmark
\ninterest rate to the current level of about 13 percent compared
\nto more than 35 percent early this year, banks are still
\nreluctant to resume lending or lower their lending rates to
\naffordable levels.<\/p>\n
Bank Indonesia officials have said that some banks still need
\nup to a further three months to adjust their lending rates
\nbecause they raised the funds when time deposit rates were still
\nrelatively high.<\/p>\n
Analysts have also said that banks still perceive a high risk
\nin investing their money in the real sector.<\/p>\n
Economist Umar Juoro of the Center for Information and
\nDevelopment Studies (CIDES) agreed.<\/p>\n
\"The loans must not be used to finance mega projects which are
\nnot related to the acceleration of the economic recovery,\" he
\nsaid, adding that the new loans would add to the country's
\nalready high debt burden of around $70 billion.<\/p>\n
Both Adiningsih and Umar highlighted the importance of the
\nparticipation of non-governmental organizations in the control of
\nthe use of the foreign money to prevent misuse or embezzlement.<\/p>\n
\"So long as the state audit agencies can't work properly,
\nthere's nothing wrong with the involvement of parties outside the
\ngovernment,\" Adiningsih said.<\/p>\n
Several non-governmental organizations (NGOs) and opposition
\nparties had earlier demanded that both the World Bank, the
\ncoordinator of the CGI, and the government delay the meeting
\nuntil the country take on a new government later this year.<\/p>\n
The NGOs also feared embezzlement of the foreign loans by
\ngovernment officials.<\/p>\n
An internal World Bank memo leaked to the press last year said
\nthat some 20 percent of the Bank's loans to the country had been
\nmisappropriated.<\/p>\n
Local press reports have also reported misallocation of
\noverseas funds supposed to be used to help the poor in surviving
\nthe current economic crisis. (rei)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/government-urged-to-use-cgi-loans-for-recovery-1447893297",
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