Ginandjar to sound out Japan's loan commitment

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)