Government urged to anticipate change in WB loan policy

Government urged to anticipate change in WB loan policy

JAKARTA (JP): The government must immediately take steps to
anticipate the plans by the World Bank to cut back its lending to
Indonesia, an expert said.

Pande Raja Silalahi, an economist at the Centre for Strategic
and International Studies (CSIS), said on Monday that foreign
loans were still needed to plug the state budget deficit.

"The government must take steps to anticipate this," he told
The Jakarta Post.

"The government has said the country must reduce its
dependence on foreign loans, but so far no clear program has been
disclosed," he added.

According to Dow Jones newswires, the World Bank planned to
cut back the flow of finance to Indonesia that averaged US$1.30
billion a year during the 1990s.

Instead, the World Bank believes Indonesia would benefit from
loans of between $400 million and $1 billion a year, provided
through the bank's concessional lending arm, the International
Development Association (IDA).

IDA loans are interest-free, have terms of up to 40 years and
the borrower faces only a small access charge to draw upon these
funds. Accordingly, IDA loans are only made available to nations
burdened with high levels of chronic poverty, with little hope of
luring private investment or finding the funds to finance
development projects.

Pande said the change in the World Bank strategy might reflect
the reality that the country could face difficulties in repaying
its mounting sovereign debt.

Pande added it could also be aimed at pushing the government
to accelerate the implementation of the various reforms.

"It (the change in strategy) could have multiple objectives,"
he said.

"On one hand, they (the World Bank) realize the country's
sovereign debt is already very big and on the other hand, they
want to push the government to accelerate the reform program," he
said.

Pande said it was not clear when the World Bank would
implement the new loan strategy.

The World Bank hopes IDA loans will ensure a continuing flow
of finance for development and poverty alleviation projects
without increasing Indonesia's debt-service demands in the near
term.

But approval from the World Bank's board of a shift to
"softer" loan conditions for Indonesia under IDA terms isn't
guaranteed.

"There will be legitimate questions by the board as to whether
Indonesia qualifies for IDA now," World Bank country director in
Indonesia Mark Baird was quoted by Dow Jones as saying.

He pointed to Indonesia's struggle to combat corruption and
its poor record on implementing reforms as obstacles it must
overcome to win not only the confidence of World Bank directors,
but also that of foreign investors and donors.

President Abdurrahman Wahid said on Monday that Indonesia
should learn from Nigeria's initiative to reduce its reliance on
funding from international financial institutions such as the
World Bank and the International Monetary Fund (IMF).

"(Nigerian) President Obasanjo has adopted the policy of not
relying on anybody, including the World Bank and the
International Monetary Fund," Abdurrahman said during the
induction of the new Indonesian ambassador to Nigeria, Moezdan
Rasjad.

The IMF promised the current administration a bailout loan of
some $5 billion in January last year. So far the fund has
disbursed about $1 billion.

The fund delayed in December the disbursement of some $400
million due to the country's slow progress in the implementation
of key economic reform programs.(rei)