Ginandjar to sound out Japan's loan commitment

JAKARTA (JP): Coordinating Minister for Economy and Finance Ginandjar Kartasasmita will leave for Tokyo on Monday to secure loans already committed by the Japanese government to Indonesia's current budget and to discuss budget financing needs for fiscal 2000/2001.

Ginandjar told reporters on Wednesday his meetings with Japanese leaders would discuss the general outlook of the economy, the development of the current budget and broad outlines of financing needs for next year's state budget.

He said he expected to meet with the Japanese prime minister, the minister of international trade and industry, other policy makers and leaders of the Liberal Democratic Party.

"Although the next state budget will be decided by the next government, donor countries need to know well in advance our financing needs," he said.

A new government is scheduled to be formed in November on the basis of the June 7 election results.

Ginandjar declined to specify the amount of new loans which will be sought from donors at the annual meeting of the Consultative Group on Indonesia (CGI) in Paris later this month.

"But discussions are going on with the largest creditor members such as the World Bank, Asian Development Bank and Japan."

Separately Director General of Budget Darsyah said on Wednesday that new overseas loans needed might be quite substantial considering a lower tax revenue due to declining interest rates of bank time deposits and huge spending on bank recapitalization program and various subsidies.

The government received quite a large sum of income tax revenues in the previous fiscal year, particularly due to the high interest rate of bank time deposits which soared to more than 70 percent in the second half of 1998.

Ginandjar added that the government and the International Monetary Fund were reviewing assumptions used for projecting economic targets, taking into account the latest positive developments of several key economic indicators.

He said the projection of economic growth (gross domestic product) for this year could be one of the targets to be revised upward.

The government and IMF previously projected economic growth of between zero and 2 percent for this year.

Ginandjar is now optimistic the growth will most likely be higher than 1.5 percent this year.

The Central Bureau of Statistics reported early this month that the economy grew 1.82 percent in the second quarter compared to the same period last year and expanded by 0.47 percent from the first quarter.

In the first quarter, the economy contracted by 10.34 percent compared to the same period last year but increased 1.34 percent compared to the last quarter of 1998.

The economy suffered negative growth of almost 14 percent for the whole of 1998.

Ginandjar said the next letter of intent with the International Monetary Fund currently under preparation would give prominence to fiscal problems, notably efforts to raise budget revenues.

The letter of intent stipulates the government's commitment to implement reform measures as agreed with the IMF. The document is tied to the disbursement of loans under the IMF bail-out program.

The government has thus far drawn about US$10 billion of the $12.5 billion contribution of IMF to the bail-out fund, which started in November 1997.

Ginandjar said budget revenues for the next fiscal year would depend significantly on the proceeds from the recovery of assets taken over by the Indonesian Bank Restructuring Agency from closed and nationalized banks.

"This asset recovery will be crucial for safeguarding the next state budget."

A source at the Finance Ministry told the Jakarta Post on Wednesday that the both the government and the IMF were also now relatively more upbeat about the outlook of the exchange rate of the rupiah against the U.S. dollar.

"We're now looking at an average rate of Rp 7,000 per dollar for the fiscal year," the source said.

"The rupiah has been hovering below the Rp 7,000 level (over the past weeks)," he said.

The government assumed an exchange rate of Rp 7,500 per dollar in the current state budget, but the source said the budget assumption would not be revised.

"We expect the new letter of intent to be finalized at the latest on Friday," the source said. (prb/rei/vin)