Government to seek new CGI loan: Dorodjatun

Dadan Wijaksana, The Jakarta Post, Jakarta

The government would continue to seek loans from the Consultative Group on Indonesia (CGI) to help finance the state budget deficit next year, although higher tax revenues would be a better method, Coordinating Minister for Economy Dorodjatun Kuntjoro-Jakti said.

"For next year, I believe we still need (support from) the CGI, but hopefully we can reduce the amount by raising our income from tax," he said on Thursday in a press conference after a Cabinet meeting.

The CGI groups together the country's major donors, including 21 countries and 11 multilateral financial institutions such as the World Bank and the Asian Development Bank (ADB).

The CGI pledged a total of US$3.14 billion in loans and $586 million in grants and technical assistance to partly help cover the deficit of this year's budget, assumed at 2.5 percent of gross domestic product (GDP).

The statement renewed concern that the government is not doing enough to help the country reduce its already high public debt, both foreign and domestic, estimated at around $137 billion, almost equal to gross domestic product. This is creating a heavy burden on the state budget.

GDP measures total value of goods and services produced in a year.

However, Dorodjatun dismissed such concerns, saying that loans from the CGI, and most of other international lenders, carried soft terms and conditions for repayment, and most of them carried low interest and were long-term commitments.

But that did not mean that the government was taking the country's loan problems lightly, as it had been trying to reduce the amount from time to time, he added.

The $3.14 billion commitment for this year marks a sharp decline compared to $4.7 billion the year before.

Meanwhile, in an apparent move to gain more financial support from another key international lender -- this time the International Monetary Fund (IMF) -- Finance Minister Boediono said that an IMF team was expected to arrive next month.

The delegation will hold talks with the government on the country's economic reform programs to be stated in the next Letter of Intent (LoI).

The LoI contains a set of reform targets by which the IMF measures Indonesia's progress with economic reform. Failure to meet the agreed reform agenda may prompt the IMF to delay loan disbursement, which in turn could affect investor sentiment in the country.

The talks follow the IMF's latest vote of confidence for the country two weeks ago, when it approved $347 million worth of loans.