Government aims to limit new loans from CGI
The Jakarta Post, Jakarta
The government still needs loans from the Consultative Group on Indonesia (CGI) to help plug next year's state budget deficit, but has vowed to keep them in line with the country's commitment to reduce dependency on foreign debts, a senior minister said.
State Minister for National Development Planning Sri Mulyani Indrawati asserted that the new loans would not exceed last year's US$3.4 billion, and is also expected to cover only half of the 2005 state budget deficit.
"The figure is the upper benchmark for next year's loans from CGI," she told reporters on Wednesday.
The CGI, a group of 30 bilateral and multilateral donors including the World Bank and the Asian Development Bank, is expected to hold its meeting in the second week of January next year.
Last year CGI pledged $2.7 billion in loans and grants for the 2004 state budget, plus another $700 million in grants and technical assistance for the regions and non-governmental organizations.
The government plans to revise next year's state budget deficit figure from 0.8 percent to 1 percent of the gross domestic product (GDP), on the back of its plans to boost infrastructure development next year, among other things.
Mulyani explained that there are two issues that have created a dilemma for the government in accepting new loans from the CGI.
On the one hand, she said, donors have indicated that they are actually willing to give more funds to Indonesia next year, while the government also needs the funds to spur economic growth.
"But on the other hand, the government wants to stick to its commitment to reducing foreign debts and the debt ratio," she said. "We will therefore seek an in-between solution."
The World Bank recently said that it has put Indonesia in its "high case scenario" country list, meaning the country would be eligible to receive annual loans of up to $1 billion, from the usual $400 million.
The government has planned to reduce the debt ratio to 54.9 percent of GDP next year, down from 60.1 percent in 2004.
Mulyani previously said that the government would also draft its own agenda and suggest it to the CGI, rather than taking for granted what the group was willing to commit.
Local economists have long urged the government to reduce Indonesia's dependency on foreign debts.
They argued that due to rampant corruption the funds were not used for public welfare -- such as for education and health care -- but instead had become a burdensome debt trap.
Global graft watchdog Transparency International this year ranked Indonesia as the fifth most corrupt nation, while the United Nations has put the country at the low rank of 111 on its human development index list.
Commenting on the government's plan to take new CGI loans, economist Bustanul Arifin said it was reasonable, as long as it was manageable and the government really needed it in the face of scarce domestic funding for the state budget.
"The government, however, has to ensure that the new debts are actually used for development, and seek debt swap schemes from the donors," he said. "Otherwise, it could face public dissatisfaction, and we will not progress in financing our debts either."