RI's high deficit still acceptable: WB official<\/p>\n
JAKARTA (JP): Dennis de Tray, the representative of the World
\nBank here, said that Indonesia's widening current account deficit
\nremains under control.<\/p>\n
He said that the deficit still poses no serious problem
\nbecause it is largely the result of increases in imports for
\nproductive activities rather than increases in spending on
\nconsumer products.<\/p>\n
\"The deficit is growing because more people are investing in
\ninfrastructure and productive businesses activities, which in the
\nfuture, will not only generate more exports but also reduce
\nimports,\" he said.<\/p>\n
He said that, in contrast, the worsening of the current
\naccount deficit of most Latin American countries in the 1980s was
\nmainly caused by a sharp increase in their spending on consumer
\nproducts.<\/p>\n
\"But this is not the case with Indonesia as far as I can
\ntell,\" he told reporters during a break in a World Bank-sponsored
\nconference on infrastructure.<\/p>\n
The three-day seminar, which was officially opened by
\nPresident Soeharto Monday, featured senior government officials
\nand noted business executives from a number of Asian countries.<\/p>\n
The expected Indonesian current account deficit was revised
\nupward to $8.75 billion in 1996\/97 fiscal year from an earlier
\nestimate of $6.9 billion, due to increasing imports.<\/p>\n
The increase in the projection of the current account deficit
\nin this fiscal year, which will end next March, sent an alarming
\nsignal to economic observers.<\/p>\n
Economists said that the government should be able to curb
\nimports and reduce commercial borrowing from international
\ninstitutions to control the sharp growth in the deficit.<\/p>\n
The failure to curb the growth of the deficit would be fatal
\nfor Indonesia, according to the economists, whose foreign loans
\nhave already reached the alarming level of around $100 billion.
\nSixty percent of these are owed by the government.<\/p>\n
Senior economist Sumitro Djojohadikusumo said recently that
\nthe foreign debts were already at a critical level because
\nIndonesia has to spend 32 percent of its export revenues on debt
\nrepayment.<\/p>\n
Sumitro said that serious efforts were very much needed to
\nreduce the debt-service ratio to at least 25 percent by the end
\nof the Sixth Five-Year Development Plan period in 1999.<\/p>\n
De Tray said yesterday that the government's policy of curbing
\ncommercial borrowings from overseas is a good measure to slow
\nfurther growth in the deficit.<\/p>\n
\"It is a useful instrument even though it is not 100 percent
\neffective because more and more debts are still coming through
\nprivate participants,\" he said.<\/p>\n
He reiterated that the increase in offshore borrowing would
\nnot become a serious problem as long as the debt instruments are
\nused to support productive activities. (rid\/hen)<\/p>",
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