Group pledges $2.8b for RI for this year
Urip Hudiono, The Jakarta Post/Jakarta
Impressed with the government's medium-term development plan for sustaining and improving the economy, the Consultative Group on Indonesia (CGI) pledged on Thursday to provide US$2.8 billion in loans and grants for this year's state budget.
The group of major foreign lenders would also set aside $600 million in technical assistance grants for the regions and non- governmental organizations, bringing the total pledge to $3.4 billion.
In support of the recent tsunami disaster in Aceh, the CGI also pledged a preliminary commitment of up to $1.2 billion in grants and $500 million in interest-free loans for the province's rehabilitation.
"A debt moratorium, as well as commitments for debt swap schemes from Germany, France and Italy, will be discussed later after a full assessment of the disaster," Coordinating Minister for the Economy Aburizal Bakrie said.
For the first time, this year's CGI meeting was chaired by the Indonesian government, with the expectation that Indonesia itself should determine the meeting's agenda so as to be more appropriate to the country's development needs.
The government has targeted gross domestic product (GDP) growth of 6.6 percent, a reduction in the unemployment rate to 5.1 percent from the current 10 percent, and a halving of the poverty rate to 8.1 percent by 2009.
Concerning their pledges, the group of creditors reiterated their calls for the government to continue its economic reform efforts, particularly in combating corruption, in order to improve the investment climate and to ensure transparency, especially in the management of aid for Aceh.
Japanese Ambassador Yutaka Iimura said his government was deeply impressed by the government's strong determination to continue the reforms, but asserted that improving governance was essential in any development program to alleviate poverty.
"We also request accountability in the coordination of aid for Aceh, and that the reconstruction also include reconciliation."
Japan, the World Bank and the Asian Development Bank (ADB) are CGI's three largest donors -- their contribution amounts to $2.095 billion for the budget and $438 million for Aceh.
Of this amount, the Japanese government pledged $715 million. In addition, it would also set aside $400 million in export credits and $177 million for Aceh.
World Bank regional vice president, Jemal-ud-din Kassum, expected the government to fulfill its commitment in focusing more on human development and the creation of a just society in its development plans. The World Bank pledged $730 million plus $125 million for Aceh.
Meanwhile, the ADB, which pledged $650 million, welcomed the government's clear commitments to eradicate corruption and improve the investment climate.
"Hard work still lies ahead for the government and for the donor community to ensure that funding goes to the highest priority issues to improve the livelihood of the people," ADB vice president Joseph Eichenberger said.
The CGI has been one of the country's main financing sources to help plug annual state budget deficits, despite criticism that its pledges would only worsen the country's debt situation.
However, Aburizal said that the new pledges would not add to Indonesia's debt stock, as the government would be servicing up to $5.5 billion in debts this year. "With the new pledge, our debt stock would be reduced by $2.7 billion (this year)."
Confirming Aburizal's statement was State Minister of National Development Planning/National Development Planning Board head, Sri Mulyani Indrawati, who said even with the new pledges, Indonesia's debt-to-GDP ratio would still decrease this year to 48 percent from 53 percent last year.
The government has targeted a deficit of 1 percent of GDP this year, as compared to Rp 29.6 trillion, or 1.48 percent, last year.
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