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)