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.