Government to rely on WB, ADB to cover budget deficit
JAKARTA (JP): The World Bank (WB) and Asian Development Bank (ADB) will be the primary sources of external financing to plug the state budget deficit, National Development Planning Board chairman Boediono said on Friday.
He termed them the country's traditional major lenders.
"We'll rely on our traditional multilateral and bilateral lenders. And we'll struggle for what is already definite, particularly from the World Bank and the Asian Development Bank. These are the two major lenders," he told reporters following a meeting with several senior economic ministers.
President B.J. Habibie unveiled early this week the draft of the 1999/2000 State Budget, which balances at Rp 218.2 trillion (US$29 billion), a 17.3 percent drop from the current budget.
Domestic revenue totals Rp 140.8 trillion, with more than 50 percent derived from income and value-added taxes.
Foreign revenue is expected to reach Rp 77.40 trillion to meet the budget deficit projected at 4.8 percent of gross domestic product.
Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita said on Thursday he would meet with Japanese government officials on Jan. 17 to discuss obtaining part of the Miyazawa Plan.
The $30 billion plan was pledged by Japan's finance minister last year to help revive crisis-hit Southeast Asian countries.
Boediono said the government had not decided on the amount of aid it would seek. "More calculations have to be completed."
Analysts say the government will use the Japanese aid and the World Bank's International Development Assistance (IDA) soft-term loans to compensate for lower than targeted tax revenue.
The WB provides the IDA to poor nations, of which Indonesia is now a member due to the toll of the 18-month-long crisis.
Asked whether Indonesia would request further debt rescheduling from its Paris Club creditor grouping, Boediono said: "I don't foresee the possibility."
The country received a rescheduling facility for its sovereign debt last year for two consecutive fiscal years starting in 1998/1999.
Separately, economist Hartoyo Wignyowiyoto warned that relying on soft-term loans would cause inflexibility in the country's economy because 80 percent of the facility must be used for imports from donor countries.
"The goods may not necessarily be needed by our country but we have to import them. This would make our economy less flexible," he told a seminar on Friday.
Meanwhile, House Commission VIII which deals with the state budget agreed foreign loans were still needed for its financing.
However, the commission criticized the government for being overly optimistic about this year's economic indicators in drafting the budget.
"Commission VIII thinks the assumptions are too optimistic and highly susceptible to the development of circumstances," commission head Tayo Tarmadi told a plenary session.
"The assumption used, therefore, must be more realistic."
The government based the draft budget on assumptions of zero- percent economic growth, compared to a 13 percent contraction last year, and the inflation level would drop to 17 percent from 77.63 percent.
The rupiah's exchange rate to the greenback is expected to stabilize at Rp 7,500 to the U.S. dollar. Also calculated is a price of $10.50 to the barrel for crude oil, one of the country's major revenue sources.
Economists and businesspeople have also faulted the assumptions as unrealistic because the country may be troubled by more political and economic upheaval this year.
Tayo said the commission would push the government to lower the Rp 18 trillion allotted for bank recapitalization.
The huge funding should instead be used to raise civil servants' salaries by 51 percent to bolster their purchasing power and help them better serve the people, he said.
All four House factions -- the ruling Golkar, the Armed Forces, the United Development Party and the Indonesian Democratic party -- will deliver their views on the budget next week before it is deliberated by Commission VIII and the government. (rei/das)