CGI pledges US$5.26b in financial aid for RI

CGI pledges US$5.26b in financial aid for RI

JAKARTA (JP): The Consultative Group on Indonesia (CGI) pledged US$5.26 billion in financial aid to Indonesia for the 1996/1997 fiscal year at the end of its two-day meeting in Paris yesterday.

The fresh loan commitment is slightly lower than the $5.36 billion pledged by Indonesia's creditor group in 1995/1996.

The aid commitment brought much relief to the Indonesian delegation. The meeting was attended by officials from 18 donor nations and 11 financial institutions. It was chaired by the World Bank.

Indonesian officials and observers did not expect this year's aid commitment to be as high, given the unfavorable conditions of CGI members' economies.

Indonesia's Coordinating Minister for Finance and Economy Saleh Afiff was quoted by a Kompas correspondent in Paris as attributing the higher than expected aid commitment to the Indonesian government's lobbying.

Japan remained the largest single creditor with an aid commitment reaching 227.6 billion yen ($2.16 billion). Japan's commitment rose slightly from $2.14 billion last year.

Japan's aid package for 1996/1997 consists of 190.1 billion yen ($1.8 billion) in official development loans (ODA), 16.5 billion yen ($160 million) in grants and technical assistance, and 21 billion yen ($200 million) in two-step loans.

The World Bank and the Asian Development Bank pledged $1.2 billion each, the same amount they provided last year.

Germany increased its loan commitment to $208 million this fiscal year from $125 million in 1995/1996, Australia to $50.5 million from $47 million, and South Korea to $38.7 million from $5 million.

Several donor countries cut their aid commitments. France, for instance, lowered its commitment to $100 million from $139 million. Britain cut its loans to $20 million from $155 million.

Charge d'affair of the Japanese embassy Zenji Kaminaga told reporters in Jakarta yesterday that the Japanese government met the Indonesian government's request in full.

Kaminaga said the ODA loans had been raised 18.9 billion yen, or about 10 percent, from the previous fiscal year to satisfy an appeal from the Indonesian government.

"The rise was significant as it is much higher than the 3.5 percent rise in the overall ODA budget for fiscal 1996/1997," he said, adding that the increase also reflected the Japanese government's commitment to continue supporting the development of the Indonesian economy.

He said Japan maintains its basic policy of proving its utmost support for sound economic development in Indonesia. Japan takes into account the need for further development and the close relationship existing between the two countries.

The ODA loans, carrying an interest rate of 2.7 percent a year, will go toward sustaining Indonesia's self-sufficiency in rice, improving social services, protecting the environment, and fostering human resource development, he said.

The interest rate is slightly higher than the 2.5 percent charged last year.

"From the view point of regional development, some 78 percent of project loans will be allocated for projects outside Java," Kaminaga said.

He said the Japanese government would continue to extend fast disbursing assistance in the form of sector program loans. Japan may extend other fast disbursing loans considering the magnitude and seriousness of the Indonesian government's effort to reduce its current account deficit.

Some 16 billion yen ($150 million) of Japan's official development loan of 190.1 billion yen ($1.8 billion) is earmarked for fast disbursing aid, or the sector program loans facility. The other 174 billion yen ($1.65 billion) will go to project loans.

Kaminaga said the non-ODA loan of $200 million would be financed by the Export-Import Bank of Japan. They were made available based on special consideration of the financial needs of Indonesia in 1996.

The financial assistance, called two-step loans, will finance medium and small-scale industries through local financial institutions in order to promote industrial development and strengthen industrial production, he said. (hen)