Under creditors' scrutiny<\/p>\n
There is no reason for the government to rejoice over the
\nUS$3.1 billion in new loans pledged on Thursday by its creditor
\nconsortium, the Consultative Group on Indonesia, because their
\ndisbursements are not yet guaranteed, being contingent upon
\npolicy performance. In fact, according to some sources who
\nattended the closed-door meeting, there was already an air of aid
\nfatigue among the creditors because of the government's
\ndisappointing track record in reform implementation.<\/p>\n
That the creditors still made new pledges seemed to have been
\nprompted more by their great concern over the devastating impact
\na halt in new loan commitments might have on Indonesia's fragile
\nstability. Certainly, the country's vital geopolitical role in
\nthis part of the world was also prominent in their
\nconsiderations.<\/p>\n
But then what else can the CGI creditors do but continue
\nsupporting the government, as it still owes them more than $58
\nbillion in debts outstanding as of last December.<\/p>\n
However, since the new loan pledges would not mean anything in
\nterms of remedying the nation's crisis if they were not realized
\nas liquidity flows to the state budget, the government has to
\nwork harder to secure their disbursement.<\/p>\n
For the current fiscal year alone, creditors are unlikely to
\ndisburse $1.7 billion or 65 percent of their $2.6 billion program
\nloan pledges due to the government's failure to meet policy
\nreform targets. In fact, according to the World Bank's latest
\nreport on Indonesia, only 40 percent or $9.3 billion of the $23.2
\nbillion pledged in program and project loans by CGI creditors
\nbetween 1998 and 2001 had so far been disbursed.<\/p>\n
This obviously adds to concerns about fiscal sustainability
\nbecause CGI creditors are now the only source of external
\nfinancing available to the government. Not a single foreign
\ncommercial bank is now willing to lend to the government due to
\nIndonesia's extremely high country risk rating.<\/p>\n
The tone of the meeting was set mainly by the report entitled
\nIndonesia: The imperative for reform, which was used as the main
\nbriefing shet on Indonesia at the CGI meeting.<\/p>\n
The report bluntly points out that most reform measures lagged
\nbehind schedules and that in the 100 days after assuming office
\nPresident Megawati Soekarnoputri had made little progress on
\nstructural and governance reforms.<\/p>\n
Understandably, the creditors have insisted strongly that
\ntheir loans be used efficiently and effectively and that the
\nborrower, in this case the government, take the necessary
\nmeasures, including painful ones, to ensure that the new debts
\nactually help remedy the country's economic woes.<\/p>\n
That is because the bulk of the money the creditors lend to
\nIndonesia is derived from their own taxpayers, who themselves
\nhave been required to take on greater burdens amid the gloomier
\nglobal economic outlook. For example, Japan, which usually
\ncontributes about 40 percent of the CGI's total credit
\ncommitment, is now plunging deeper into recession. Even the
\ncapital of the World Bank and Asian Development Bank, which
\ntogether contribute one half of the consortium's total loans, is
\nderived mainly from taxpayers in developed countries.<\/p>\n
It is only sensible, even imperative, for the creditors to
\nthoroughly examine whether the government has fully shouldered
\nits share of the burden and implemented all the measures required
\nto cure the country's economic ills, because they have to account
\nfor their loans to their shareholders (taxpayers).<\/p>\n
The creditors should be especially careful about extending new
\nloans because the government's total domestic and foreign debts
\nhave exceeded the country's gross domestic product. Its foreign
\ndebt service payments alone are now as large as 40 percent of
\nannual export earnings and its foreign and domestic debt service
\nobligations already take more than 42 percent of its total
\noperating budget.<\/p>\n
The creditors' demand that the government take more painful
\nmeasures does not mean undue intervention in the country's
\ninternal affairs or infringement of its sovereignty. The point
\nhere is that any new loans from the creditors would simply be
\nrendered ineffective if the government itself did not fully
\nshoulder its share of the reform burden. In the same spirit, we
\nshould not feel offended by the creditors' criticisms that
\ncorruption in Indonesia had not been curbed but had instead
\nflourished. Rampant malfeasance would waste their hard-earned
\nloans.<\/p>\n
What is at stake if the government is not capable of or
\nserious about implementing the reform measures is not only the
\nloans from creditors but also the survival of Indonesia's
\neconomy. Ineffective loans will instead add to the already huge
\ndebt burdens of the government and consequently the Indonesian
\npeople.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/under-creditors-scrutiny-1447898607",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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