Indonesia needs $6b in loans to plug budget deficit

JAKARTA (JP): National Development Planning Board (Bappenas) chairman Boediono said on Saturday that Indonesia needed between US$5.5 billion and $6 billion in new foreign loans to plug the 1999/2000 state budget deficit.

He said part of the needed loans had been secured after the country's largest donors, including Japan and the World Bank, confirmed their financial support earlier this year.

"The total (overseas loans) we need is between $5.5 billion and $6 billion for the 1999/2000 fiscal year. But some (of the needed loan) have been pledged," he announced after attending a ceremony at the State Palace.

Boediono said the remaining budget shortfall was expected to be covered by commitments from donors at the upcoming Consultative Group on Indonesia (CGI) meeting in Paris.

Finance minister Bambang Subianto said in February when proposing the current state budget which ends in March 2000 to the legislature, that Indonesia would need some $10.32 billion in overseas loans.

The total consisted of $6.32 billion in program loans to finance various development programs and $4 billion in project loans.

Bambang said the $4 billion in project loans was secured because they were loans carried over from the previous fiscal year.

He said of the remaining $6.2 billion in program loans, some $4.4 billion had been secured after the World Bank and the Asian Development Bank pledged to each provide $1 billion, and Japan $2.4 billion through the so-called Miyazawa Plan.

This leaves a shortfall of $1.9 billion, which officials hope to cover at the CGI meeting on July 27 and July 28.

Director general of budget Darsyah declined to confirm this figure.

"I don't know how much Indonesia will seek at the upcoming CGI meeting. This is decided by a few ministers," he said.

However, based on Boediono's statement, Indonesia would need to secure between $1.1 billion and $1.6 billion at the upcoming donors meeting.

An official at Bappenas who declined to be named said the improving economy as compared to when the state budget was drawn up had lowered the amount of loans needed.

Indonesia particularly needs program loans to help finance the costly bank restructuring program, which requires Rp 17 trillion ($2.54 billion) of the current state budget.

The government, the World Bank and the chairman of the CGI have been pressured by opposition parties and several non- governmental organizations to postpone the upcoming donors meeting.

Opposition parties say new loan negotiations should be held under the country's next administration, which will be formed later this year.

However, Boediono said a delay of the CGI meeting would damage confidence in the economy because the market would be nervous about the hole in the state budget.

He also said on Saturday the current administration would only negotiate for loans to finance the 1999/2000 state budget.

He said the government would not negotiate for loans needed for the 2000/2001 state budget, adding this would be the responsibility of the next administration.

"We'll just inform the donors about our estimated financial needs (for the next state budget)," he said.

Several government officials earlier said several CGI members were ready to provide some $5 billion in new loans at the next CGI meeting. The country received some $7.9 billion from CGI last year.

Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita is scheduled to leave for Tokyo on Monday, where he will meet with high-ranking Japanese officials and seek Japan's support at the CGI meeting.

Japan is Indonesia's largest donor.(rei/prb)