Govt needs $5.65b to service foreign debts

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)