ADB, World Bank to extend new loans to help finance budget deficit
The Jakarta Post, Jakarta
Indonesia is set to receive loan packages from the Asian Development Bank (ADB) and the World Bank to help finance its budget deficit and implement reform in budget auditing.
The Ministry of Finance signed on Thursday a US$225 million loan package with the ADB, consisting of a $200 million project loan and a $25 million investment loan.
The ministry's director general of state treasury Mulia Nasution was reported by Detik.com as saying that half of the project loan, set to be disbursed within a week, would be used to plug the 2004 budget deficit, and the remainder would be withdrawn in June 2006.
The project loan has a 15-year maturation period and is expected to introduce audit reform; the investment loan has a longer maturation period of 32 years and will support critical investment needed for capacity building.
"Through improved financial management, scarce government resources will be better and more effectively utilized than before," Farzana Ahmed, team leader of the ADB loan project, said in a statement.
The government is scrambling to raise more funds to finance its budget deficit, which is projected to grow this year to 1.5 percent of the gross domestic product (GDP), or about Rp 26.3 trillion. The initial projection was 1.3 percent of GDP.
The higher deficit is mainly attributable to higher fuel subsidy costs ensuing from record-high global oil prices over the past several months.
Mulia said the country would also be taking out a loan of $300 million from the World Bank in the coming two weeks to curb the expanding deficit.
The World Bank, one of the country's main creditors, said recently that it would raise its loan commitment to Indonesia in the near future, in view of the country's continued progress in its economic reform agenda.
Under the Bank's high-case lending scenario, Indonesia will be eligible for over $1 billion in loans.
Aside from securing loans and pushing for more tax revenues to finance the budget deficit, the government is also selling its minority shares in banks.
Earlier this month, the government sold a 16.28 percent stake in publicly listed Bank Niaga for Rp 585.5 billion ($63.26 million), and raised another Rp 1.16 trillion from the divestment of a 20 percent stake in publicly listed Bank Permata.