Govt cautioned to use CGI loans effectively

JAKARTA (JP): Economists have called on the government to use the US$4.7 billion in loans pledged by the international lender countries more effectively, so it could reduce its dependence on foreign loans in the future.

"With such current conditions of hardship, the government has to exert its utmost efforts to use the foreign loans effectively," said economist Ingot Abimanyu on Thursday.

Indonesia's major lenders in the Consultative Group on Indonesia (CGI) pledged on Wednesday some $4.7 billion in loans, about a half billion of which are grants, to help the country cover its next state budget deficit.

Anggito said if the government could use the loans effectively, the country would gradually need a lesser amount of foreign loans in the future.

"To measure the effectiveness we look at the ratio between the amount of debt and the Gross Domestic Product (GDP). If the ratio figure went down over a period of time, that means the debt is used effectively," he said.

So we hope that in terms of its ratio as well as its nominal value, Indonesia's debt will be gradually reduced, he added.

He said it was impossible that Indonesia put its hands clean of foreign debts now, as publicly voiced by some parties.

"We are in a debt trap position. We cannot live without foreign loans for the time being," Anggito said at a seminar to evaluate the first 100 days of the National Unity Cabinet under President Abdurrahman Wahid.

The seminar was jointly sponsored by the Advisory Group on Economic Industry and Trade (ECONIT) and the Institute for Development of Economics and Finance (INDEF).

Anggito added that Indonesia for the time being could not afford to reduce its debts, at least during the period when both the private sector and government tax revenues could not yet be relied upon to support the state budget.

"This year is not a good time to reduce debt. There is a tolerable limit within which we can borrow money in the context of fixing the economy for at least the medium term," he said

He, however, agreed with the idea that the $4.7 billion in loans for Indonesia should not be considered an achievement but rather just part of the country's economic rescue.

Director of ECONIT Arif Arryman said there was nothing new and special about the loans pledged by the lender countries.

He said the lender countries under CGI had always been supportive of the government, so the pledged amount was not an achievement.

"The achievement is whether the government could capitalize on such foreign support," Arif said.

Indonesia, prior to the loans pledged by the CGI lender countries, said it needed between $4.2 billion and $4.7 billion in loans to help finance the April-December 2000 state budget deficit, estimated at about 5 percent of GDP.

CGI, consisting of 33 lender countries and international lending institutions, in a demonstration of their support of Indonesia's current administration, has pledged the maximum amount of funds the country might need.

For the current April 1999 - March 2000 state budget, the CGI lender countries committed $5.9 billion, but part of it was canceled following strained relations between the previous government and its lenders in the wake of human rights violations in East Timor and a banking scandal.

An economist from the National Mandate Party (PAN), Faisal Basri, said Indonesia only needed half of the amount of the loans.

"We needed much less than that if the asset sales by the Indonesian Bank Restructuring Agency (IBRA) had gone smoothly without external disturbance," he said.

We wanted the source of the economic growth to come from investment, not from consumption. This way we will have sustainable growth, not an artificial one, he said. (udi)