Budiono cautions against CGI meeting postponement

JAKARTA (JP): Chairman of the National Development Planning Board (Bappenas) Budiono warned on Tuesday that a delay in the upcoming Consultative Group on Indonesia (CGI) donors meeting would damage confidence in the country's economy.

He said the annual CGI meeting should proceed as scheduled to allow the government to secure loan financing for the 1999/2000 budget gap.

"(If the CGI meeting is delayed) the market would be apprehensive of the likely impact of a hole in the current budget. This could create another roller-coaster (in the exchange rate of the rupiah against the U.S. dollar)," Budiono told members at a hearing of the House of Representatives Commission VIII for the state budget and finance.

The meeting is to be held on July 27 and July 28 in Paris. The CGI donors grouping is led by the World Bank, with members including the Asian Development Bank, the Islamic Development Bank and bilateral donors such as Japan, the United States, Canada, South Korea, Germany, France, Spain, Italy, New Zealand, Denmark and Australia.

Several opposition political parties, including the National Mandate Party (PAN) and the National Awakening Party (PKB), as well as non-governmental organizations, have demanded the World Bank and the government postpone the meeting. They have asserted that the country's new government, to be formed later this year, must be included in the crucial talks.

Opponents of the meeting have also insisted that President B.J. Habibie's administration should no longer be authorized to seek new foreign loans because it had failed to combat corruption.

Indonesia held legislative elections on June 7. The elected legislative body, together with regional and interest group representatives, will vote for the next president later this year.

Budiono said the next administration would be very busy during its first days in office and would not have time to negotiate overseas loans to finance the gap in the current budget ending in March 2000.

"It will take three to four months after the pledges before the donors disburse their loan commitments."

He said the current government would not seek loan pledges for the 2000/2001 budget.

"We understand this is the authority of the new government. But we will hold general discussions to sound out commitments for the 2000/2001 budget.

"I hope that all parties will support the CGI meeting plan because this is truly in the interests of this country.

"Don't let the political transition jeopardize the economic recovery program," he said.

Budiono declined to say how much money Indonesia was seeking from the CGI, which last year provided the country with US$7.9 billion.

A government official said earlier that several donors had indicated they were ready to provide some $5 billion in new loans.

Indonesia has been badly hit by the economic crisis, which started in August 1997, forcing the government to rely heavily on overseas financial support.

The 1999/2000 budget needs some $10.3 billion in overseas loans.

Minister of Finance Bambang Subianto said earlier this year that the government had yet to secure approximately $1.9 billion of that amount.

But Budiono said the final amount of the new loans would only be decided in Paris after the donors made up-to-date calculations, which took into account recent developments in the economy, including oil prices.

Indonesia's economy has started to recover with various key indicators displaying positive signs. The rupiah has stabilized to about Rp 6,700 per U.S. dollar, compared to Rp 17,000 last year. Inflation and domestic interest rates have also shown significant improvement.

Separately, the Asian Development Bank said on Tuesday it planned to hold a high-level dialog in Jakarta with the government on July 22 to discuss and agree on concrete steps to combat corruption.

"The ADB accords high priority to fighting corruption and has adopted an anticorruption policy to guide its anticorruption efforts," the bank said in a statement.

ADB said the dialog would be followed by an open forum on the same day, to which non-governmental organizations and members of the public would be invited.(rei)