Govt debt burden set to decrease

JAKARTA (JP): The negative net transfer of official capital from Indonesia increased last fiscal year but is expected to decrease in the current fiscal year, Minister of Finance Mar'ie Muhammad said yesterday.

Speaking at a hearing with the House of Representatives' Commission VII -- which oversees banking, finance, trade and cooperatives -- Mar'ie said that the government's servicing of and installments on foreign debts increased to Rp 18.22 trillion (US$8.18 billion) during the 1994/1995 fiscal year, which ended in March, but that receipts from new loans amounted only to Rp 10.98 trillion.

Even though the government's receipts from new loans in 1994/1995 were larger than the Rp 10.37 trillion booked in the previous fiscal year there was still a negative net transfer of Rp 7.24 trillion last year, he added.

The negative transfers were up by 6.5 percent from Rp 6.8 trillion in the 1993/1994 fiscal year.

Mar'ie said that in the current fiscal year the servicing and installments of official foreign debts are estimated to decrease to Rp 17.9 trillion and the amount of new foreign loans is expected to reach Rp 11.76 trillion.

Therefore, the negative net transfers in the current fiscal year will decline to Rp 6.14 trillion, or 15 percent less than last year's negative net transfer of Rp 7.24 trillion.

"We will continue to suffer such negative transfers of official capital during the current five-year development plan. However, it is worth noting that this situation is not an extraordinary matter," Mar'ie told the commission.

Mar'ie added that the government is committed to further decreasing the negative net transfers in the official capital account but he did not give further details.

Indonesia's foreign debts are currently estimated at about $100 billion, of which $60 billion is owed by the public sector and the remainder by the private sector.

At yesterday's hearing, Mar'ie also expressed optimism that this year's inflation rate will remain at a one digit level, between 8.8 percent and nine percent.

The cumulative inflation rate for the first eight months of this year reached 6.41 percent, slightly lower than the 6.85 percent recorded for the same period of last year.

Mar'ie also reported to the House members that bank credits extended to small and medium enterprises had already reached Rp 37.6 trillion as of June, or 25.1 percent of all commercial banks' total outstanding credits.

Of the Rp 37.6 trillion, 45 percent was made up of small loans of less than Rp 25 million, 10.6 percent of loans amounting to between Rp 25 million and Rp 50 million, 14.7 percent of between Rp 50 million and Rp 100 million and 29.5 percent of between Rp 100 million and Rp 250 million.

Mar'ie said the collateral-free loans of up to Rp 50 million for small and medium-sized enterprises he proposed last month are expected to provide small enterprises with access to bank credits.

He said about 19 million small businesses will be eligible for the loans.

He said the state-owned Bank Rakyat Indonesia and Bank Negara Indonesia will start providing collateral-free loans as of this month. The other state-owned commercial banks -- Bank Ekspor Impor Indonesia, Bank Bumi Daya, Bank Pembangunan Indonesia, Bank Dagang Negara and Bank Tabungan Negara -- will follow suit next month.

"Final preparations for the loan scheme will be discussed here later this month by the branch managers of all state banks, the governor of Bank Indonesia (the central bank) and myself," Mar'ie added. (kod/rid)

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