Government to rely on WB, ADB to cover budget deficit

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)