Big parties agree on CGI loan program

Big parties agree on CGI loan program

JAKARTA (JP): The five major political parties, except the
National Mandate Party (PAN), agreed on Monday that Indonesia's
creditors continue loan disbursements to plug the current state
budget deficit.

The five party leaders expressed their views at a closed-door
meeting with World Bank resident staff and discussed the agenda
of the upcoming meeting of the Consultative Group on Indonesia
(CGI) in Paris early next week.

Kwik Kian Gie, a representative from the Indonesian Democratic
Party of Struggle (PDI Perjuangan), the front-runner of the June
7 elections, announced after the meeting that his party supported
the continued disbursement of loans from CGI creditors.

"The current budget deficit should be covered," Kwik said in
reference to the government's plan to ask for new loans from CGI
at its Paris meeting next week.

He warned, though, that as far as state spending was concerned
the current government was entitled to propose a budget program
only for the period up to November when a new government is
scheduled to be formed.

"CGI creditors should convene a meeting with the new
government sometime in November to discuss budget spending
programs," he said.

National Development Planning Board (Bappenas) chairman
Boediono said on Saturday that Indonesia needed between US$5.5
billion and $6 billion in new foreign loans to plug the 1999/2000
state budget deficit.

He said part of the needed loans was secured after the
country's largest donors, including Japan and the World Bank,
confirmed their financial support earlier this year.

"The total of overseas loans we need is between $5.5 billion
and $6 billion for the 1999/2000 fiscal year. But some of the
needed loan was pledged," Boediono said.

Boediono added the remaining budget shortfall was expected to
be covered by commitments from donors at the upcoming
Consultative Group on Indonesia (CGI) meeting in Paris on July 27
and July 28.

At the meeting with World Bank representatives on Monday, Kwik
also called on all other major parties to start thinking about
ways of gradually decreasing new foreign loans.

"The foreign debt burden should be reduced to prevent a debt
trap for the next generation," Kwik said.

"We should sacrifice and not hesitate to cut down on
development spending even though such a move will affect economic
growth," he added.

Indonesia, he added, did not ask for debt forgiveness from the
World Bank, the chair of CGI and other creditors.

"We only ask them for advice on how we can gradually reduce
our debts in the future."

Kwik criticized the perception among international creditors
and the Indonesian government which associated the approval of
big loans as a reflection of high credibility.

"No wonder in the past each time Indonesia got new big loan
commitments from CGI creditors the government would proudly
announce the new pledges as a great achievement," Kwik said.

Sayuti Hasibuan from the United Development Party (PPP) said
his party also agreed to continued CGI loan disbursements to plug
the current budget hole.

"The loan disbursement schedules cannot be stopped as they are
needed to maintain the welfare of Indonesians," Sayuti said.

However, he suggested that creditors forgive at least 30
percent of Indonesia's official debts which are now estimated at
US$70 billion.

He argued a good portion of the huge foreign debt overhang
incurred without the people's consent.

"Besides, a large sum of foreign debts was wasted so far of
which creditors and the Indonesian government have to be held
responsible," Sayuti said.

He also called for prudence for new loans to ensure that funds
be used optimally for the people's benefit.

Eki Sachruddin from the ruling Golkar party said his party
shared the views of the three other major political parties,
namely, PDI Perjuangan, PPP and the National Awakening Party
(PKB) regarding the continuation of foreign loan disbursements.

"It is difficult to raise domestic capital to fuel Indonesia's
economic recovery. Given our economic recession, we sorely need
foreign loan financing," Eki added.

Eki said after the meeting that all parties except PAN
signaled agreement on the CGI loan disbursement.

Bara Hasibuan from PAN confirmed after the meeting that his
party did not see any reason at all for the present government,
which was a transitional one, to seek new loans to finance the
current state budget.

"Our calculation shows the current state budget no longer
needs additional foreign loans because the deficit was already
covered," Bara added.

"New loan disbursements can wait."

Bara said his party also did not believe the Habibie
administration, notoriously known for its rampant corrupt
practices, could be entrusted with new foreign loans.

"The flagrant misuse of social safety net programs is a
glaring example of how corrupt the present administration is,"
Bara pointed out.

"PAN suggested the upcoming CGI meeting only evaluate the past
misuse of CGI funds and devise ways of preventing further abuse,"
he said.

Fajrul Falaakh, a representative from PKB, was not available
for comment after the meeting.(udi)