House balks at foreign loan plans
House balks at foreign loan plans
JAKARTA (JP): The Budgetary Commission of the House of Representatives has raised concern over the government's plan to increase foreign borrowing to finance its development programs in 1995-96.
In its 28 page commentary on the state budget draft proposed last week by President Soeharto, the commission said yesterday in the House's plenary session that what the government has so far presented to the House covers only the expected disbursement of foreign aid but not its terms and conditions.
"When the government is dealing with any credit agreement, it should inform the House completely, including its terms and conditions," said Dadi Sukardi, the commission's chairman and member of the Armed Forces faction.
For the next fiscal year, the government has budgeted Rp 11.76 trillion (US$5.42 billion) from foreign aid, an increase of 17.4 percent from this fiscal year, to balance the difference between the projected domestic revenues of Rp 66.27 trillion and the expected expenditures of Rp 78.02 trillion.
Dadi noted that the revenue expected from foreign aid is 3.5 percent higher than the target for the second year of the Sixth Five-Year Development Plan (Repelita VI), which began in April 1994.
In a briefing on the budget draft that was convened for journalists and several economics ministers last week, Minister of Finance Mar'ie Muhammad said that the increase in foreign aid receipts will not result from new borrowing but from the delayed disbursement of prior aid commitments from creditors.
Coordinating Minister of Economy and Finance Saleh Afiff made his own prediction and calculates that the country's foreign debt level will stand at nearly $100 billion at the end of the next fiscal year. Of this amount, $59 billion will be owed by the government and the remainder by the private sector.
According to the budget proposal, the government's debt servicing for the next fiscal year is projected to reach Rp 17.9 trillion or Rp 243 billion higher than this fiscal year.
Safe
However, Afiff assured that even at such levels, the debt posed no threat, especially when compared with the country's exports revenues and the size of the economy as a whole.
"Although our commission understands, we are still reminding the government to manage foreign debts carefully to lessen the ever-increasing burden," Dadi said.
The commission then suggested that the government reevaluate any projects financed through foreign aid, especially the idle ones.
"The construction of projects which are still feasible should be speeded up, while the unfeasible ones should be halted altogether," Dadi demanded.
He commended the government's move to pay off some of its high-interest debts and suggested that, if possible, it repay all of them prior to maturity.
The government has said that it will repay its high-interest debts to the World Bank and the Asian Development Bank ahead of schedule from the sales of 25 percent of the ordinary shares of state telecommunication company PT Indosat on the New York Stock Exchange last October, worth $799 million.
Debt repayments are expected to accelerate again when a number of state companies, including the other telecommunication company PT Telkom, toll road operator PT Jasa Marga and electricity company PT PLN, float some of their shares on both foreign and local stock markets.
The commission also recommended that the government take special measures to control foreign borrowing in the private sector so as not to further burden the country's current accounts.
To ensure more self-reliance in future state budgets, the government hopes to increase domestic revenues, primarily through taxation and tourism.
The commission also asked the government to be economical in using foreign exchange, especially in the service sector, which remains the main contributor to the current account deficit. (rid)