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)