Government to seek new CGI loan: Dorodjatun

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.