Govt cautioned to use CGI loans effectively

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)