Creditors will meet here over aid package

JAKARTA (JP): Indonesia's main donors will meet here in January to assess the country's aid needs for the upcoming 1999/2000 fiscal year, Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita said here on Wednesday.

Ginandjar said the meeting would also evaluate the implementation of the state budget during the 1998/1999 fiscal year which ends in March.

"There is a possibility of holding a kind of mini-CGI meeting sometime at the end of January 1999 in Jakarta," he told reporters before attending a Cabinet meeting.

He was referring to the Consultative Group on Indonesia, the country's main donor group which is led by the World Bank. The group was established in 1992 to replace the Dutch-led Inter- Governmental Group on Indonesia. The CGI usually meets every July to decide on loan assistance for the country.

CGI pledged in July of this year to provide the country with US$7.9 billion in aid to help plug the country's huge budget deficit of 8.5 percent of gross domestic product (GDP). The deficit is mainly a result of the financing needed to help the poor survive the current economic crisis.

The CGI groups Australia, Austria, Belgium, Canada, Denmark, Finland, France, England, Germany, Italy, Japan, New Zealand, Norway, South Korea, Spain, Sweden, the United States, the Kuwait Fund for Arab Economic Development, the Saudi Fund for Development, the Nordic Investment Bank and the Islamic Development Bank.

Ginandjar said that the budget deficit during the next fiscal year is expected to be around 6 percent of GDP.

"In our agreement with the International Monetary Fund (IMF), we forecast this year's budget deficit at 6 percent. It will be the same or lower next year," he said.

The government and the IMF had earlier forecast the budget deficit at 8.5 percent of GDP, but based on positive developments in the economy and the strengthening of the rupiah they changed this figure to around 6 percent.

The World Bank last week decided to delay the disbursement of an additional $1 billion in loans due to the narrowing of the budget deficit.

The Bank's country director for Indonesia, Dennis de Tray, said that the additional loan would be released to the new government which is expected to be formed after next year's general election.

The Bank initially pledged to disburse a total of $3 billion in the current fiscal year.

The Bank had been under strong criticism for its failure to monitor the use of its loan money, which had reportedly been misused by government officials.

Asked about the direction of the rupiah against the U.S. dollar, Ginandjar said that there was still room for the rupiah to strengthen further.

The rupiah closed lower at Rp 7,825 against the U.S. dollar on Wednesday, down from Rp 7,750 on Tuesday. The currency plunged to more than Rp 11,000 against the dollar in June, following widespread riots and the fall of former president Soeharto in May.

"We're on the right track (in our economic policy)," he said, referring to the strengthening and the stability of the rupiah despite the increasing political tensions in the country. (rei/prb)