CGI slammed for being insensitive about RI's debts

Dadan Wijaksana, The Jakarta Post, Jakarta

The meeting of the Consultative Group on Indonesia (CGI) was a disappointment because it did not address measures needed to tackle the country's huge debt, International NGO Forum for Indonesia Development (INFID) says.

INFID, a grouping of a number of non-governmental organizations (NGOs), said the new loan pledge announced on Thursday showed the international donors encouraged -- to some extent -- the country to remain trapped in the debt circle.

"The forum did not seriously discuss efforts to reduce our debts, domestic or foreign. I'm disappointed with it," INFID director Binny Buchori said Friday.

Binny said such a situation would only push Indonesia deeper into debt trouble.

"Although the debt-to-gross domestic product (GDP) ratio has now declined to around 60 percent, the outstanding (debt) is still huge."

At the end of the two-day CGI meeting, the country's traditional foreign donors agreed to provide US$3.4 billion in new loans and grants for the country next year. Some $2.8 billion of the loans would go to finance the 2004 state budget.

Some economists have said the CGI loan is crucial for the country as it would no longer be eligible to the Paris Club debt rescheduling facility once the current International Monetary Fund program expires at the end of this month.

Excluding the latest CGI loan pledge, the country's foreign debt outstanding as of September stood at $77.1 billion, while domestic debts stood at Rp 619.7 trillion.

Despite the fact the CGI was never intended as a forum for the country to seek debt relief facility, Binny said it was the least the grouping of 30 multilateral and donor countries could do, if they were seriously concerned about Indonesia.

Airing similar concerns was Vice President Hamzah Haz, who asked the grouping to give Indonesia breathing space in repaying its debts to the CGI, by allowing it to temporarily skip the payments, so that the country could provide higher allocations for more productive spending.

"The CGI should give Indonesia such a debt relief until after the economy has fully recovered," Hamzah was quoted by Antara as saying, adding the CGI could ask for the repayment after the economy manages to grow by around 7 percent.

During the period of time, he added, the government could allocate more on other crucial spending as the pressure on the state budget lessens.

The government said it had no alternative but to look for external funding, to help it finance the state budget, which ironically has been burdened heavily by the payments of existing debts, both domestic and foreign.

Under the 2004 budget, for instance, Rp 131.2 trillion has been earmarked to repay domestic and foreign debts, both the interest and principal. The figure, which accounts for more than one third of the budget's total expenditure, is almost double the amount set for development spending which stands at Rp 70.9 trillion.

Some analysts however, while agreeing the debt level was alarming, said they were of the opinion that it remained manageable. What's more important was ensuring how to make the best use of those loans, for the good of the country.

The last thing Indonesia needed was to have its debt level increased, which means more burden on the budget, without taking the benefit out of it, they said.