CGI promises to maintain support for Indonesia

CGI promises to maintain support for Indonesia

Dadan Wijaksana, The Jakarta Post, Jakarta

The Consultative Group on Indonesia (CGI), which represents the
country's major lenders, vowed on Monday to maintain financial
support for Indonesia when the country ends the current
International Monetary Fund reform program later this year.

"There is a strong willingness from the donors to support the
government. The donors very much respect what the government has
been doing under the IMF's program.

"Each of the donors also believes that the (current) sound
macroeconomic policy must be continued, and in light of that
there will be very strong support from the international
community," World Bank country director Andrew Steer said during
a media briefing after the CGI midterm meeting here on Monday.

The meeting, a prelude to the annual meeting to be held in
October, was attended by representatives from 30 donor countries
and agencies, as well as Indonesia's top economic ministers, and
cohosted by the World Bank.

The donors did not make any new loan commitments during the
meeting, but the remarks coming from it should give the
government some relief in drawing up the 2004 state budget.

The government will require significant external financing for
the budget, with the termination of the IMF's supervisory role in
the country's economic reform program leaving Indonesia no longer
eligible for the debt rescheduling facility offered by the Paris
Club of creditors nations.

According to one estimate, some US$3 billion in sovereign
debts will mature next year.

Minister of Finance Boediono said during the forum that asking
for program loans from the CGI was one of the steps the
government needed to take to secure the 2004 budget.

"In 2004, with the absence of Paris Club rescheduling and the
maturity of both domestic and foreign debts, it (the budget) will
require additional financing of 1.5 percent of GDP (gross
domestic product)," Boediono said, adding that the continuation
of the privatization program and the issuance of government
bonds, domestically and internationally, were other options for
securing additional financing.

The government has proposed to the House of Representatives
preliminary figures for the 2004 state budget, with the deficit
earmarked at 1 percent of GDP. However, this figure remains
subject to change.

As a comparison, for this year's budget -- with close to $3
billion in debt that was to mature during the year having been
rescheduled -- the CGI has agreed to provide $2.7 billion in
fresh loans to help cover the deficit, which is 1.8 percent of
GDP.

With a financing gap, the government will have to generate
additional privatization proceeds or more foreign loans to fill
this gap. Failing to do so would cut into spending on crucial
economic development programs.

Coordinating Minister for the Economy Dorodjatun Kuntjoro-
Jakti declined to say how much of the gap would need to be
covered by the CGI for next year's budget, saying that the
calculations were still being made.

"But my guess is that it is not going to be too far from what
we agreed to for this year," he said, adding that the government
was constantly striving to reduce the budget deficit.

The next meeting of the CGI will be held in October, where it
is expected the lenders will determine their new pledges for
Indonesia.