Govt needs $5.65b to service foreign debts

JAKARTA (JP): Finance Minister Bambang Sudibyo said on Monday that the government would need some Rp 40 trillion (US$5.65 billion) to service its foreign debts in the next fiscal year staring in April.

Speaking at a hearing with the House of Representatives Commission IX on financial and development planning affairs, he said that some Rp 500 billion was needed to repay domestic debts to third parties.

The sum does not include interest payments on more than Rp 400 trillion in treasury bonds issued to recapitalize banks and to repay liquidity credits to the central bank.

"Funds needed for foreign debt installment and interest payments are estimated at Rp 40 trillion," he said.

Bambang said that the government would need another Rp 40 trillion for financing price subsidies on various commodities, notably fuel, food, electricity and medicines.

"Without a policy to reduce subsidies, the amount needed may exceed Rp 40 trillion," he said.

The government, which has some $70 billion in outstanding sovereign debts, has said it would seek $2 billion in foreign debt rescheduling from the Paris Club sovereign creditors early next year.

Bambang reiterated on Monday the government's determination to start reducing new foreign borrowing next year.

"Foreign loans will only be used to finance vital projects," he said.

The government is facing a dilemma in its bid to remove the costly subsidies because of the social and political implications.

But Bambang said the government was determined to gradually reduce subsidy spendings to ease the burden on the state budget.

He argued that subsidies on some commodities, such as fuel, turned out to have been enjoyed only by a smaller group of people.

"It will be better if the funds for subsidies are used for other public interests," he added.

Bambang said that the budgetary cost of the government bank restructuring program would increase sharply next year when the program was completed, involving more than Rp 400 trillion in treasury bonds.

The interest costs of the government bonds to be covered by the next state budget is expected to total Rp 57 trillion, of which one half would come from the sale of assets by the Indonesian Bank Restructuring Agency (IBRA).

The current fiscal year state budget ends on March 31, 2000. But government will use a calender year budget starting in 2001. Since the next budget starts in April, it will cover only nine months.

Bambang added that the government would restructure the next budget to reflect that of international standards and to provide better transparency.

"For example, oil and natural gas taxes will be entered in the tax revenue side of the budget.

Under the current budget, oil and gas taxes are lumped together in total oil and gas revenues.

Bambang said that royalties and fees from natural resources and reforestation funds would be accounted for as a new component in the revenue side.

He said that proceeds from privatization programs and the sale of assets controlled by IBRA would not be stipulated in the revenue side but in the expenditure side.

According to Bambang, macroeconomic assumptions for the next budget, which are still being discussed with technical experts from the International Monetary Fund, would cover projections for the next five years.

Bambang also reported that the Rp 26.5 trillion target set for the government's non-tax revenue ( privatization of state enterprises, dividends from state companies and other revenues) for the current fiscal year would most likely be achieved.

He said that as of Sept. 30, privatization proceeds had reached Rp 3.67 trillion and dividends from state enterprises Rp 2.88 trillion.

Referring to tax efforts, Bambang said the tax coverage ratio (ratio between the amount of tax collected and potential tax capacity) had reached 66.33 percent, meaning that only 33.67 percent of the tax capacity had not yet been tapped.

He added that the government had made an inventory of state assets procured with state budget funds and the results as of April came to cumulative assets worth Rp 153.1 trillion. (rei)