Legislators warns govt over new CGI $4.8b loan

Legislators warns govt over new CGI $4.8b loan

JAKARTA (JP): Legislators expressed concern on Thursday over
the country's high level of external debt following donors'
approval to provide Indonesia with a US$4.8 billion loan to help
plug next year's yawning budget deficit.

Outspoken legislator Aberson Marle Sihaloho said that such
levels of foreign debt could undermine the country's sovereignty.

"We should reject the new loan or else we may become trapped,"
said Aberson, a senior legislator from the Indonesian Democratic
Party of Struggle, the largest party in the House of
Representatives.

Aberson, who is also a member of House Commission IX on the
state budget and finance, said that this was his personal opinion
but he would push for it to become his faction's opinion.

Indonesia's international donors grouped in the so-called
Consultative Group on Indonesia (CGI) agreed on Wednesday at the
end of their two-day gathering in Tokyo to provide the country
with the new loan.

The government announced earlier this month that the draft
2001 state budget would be in deficit to the tune of around Rp 53
trillion (about $7.2 billion based on the state budget's rupiah-
dollar exchange rate target of Rp 7,300), or 3.7 percent of gross
domestic product.

The government has said that the bulk of the deficit would be
financed by foreign loans, and the remainder would be covered by
the sale of assets controlled by the Indonesian Bank
Restructuring Agency (IBRA) and the privatization program.

The House is currently debating the draft budget with the
government, and is expected to reach agreement sometime in
November.

"Why did the donors provide us with the new loan despite
persisting political instability and legal uncertainty? The
greater the amount of the loan, the greater the amount of foreign
intervention there will be in our country," Aberson said.

"This is a problem. Our sovereignty could be weakened," he
added.

Aberson said that the approval of the CGI loan was not an
achievement or something to be proud of.

He said that the current high international oil price
presented an opportunity for the government to stop taking out
further foreign loans.

"The windfall profit from oil should help plug the deficit,"
he said.

He added that additional foreign debt rescheduling could also
reduce the overall burden on the state budget.

Economists had earlier said that legislators could reject the
CGI loan or at least request the government to only use part of
the loan due to the already high debt level and booming oil
prices.

The government had assumed an oil price of $22 per barrel, but
the price of the commodity has recently been hovering at more
than $29 per barrel.

Indonesia is one of the world's oil-exporting countries.

But, Faisal Baasir of the United Development Party, who is
also a deputy chairman of the House budget committee said that
Indonesia should accept the CGI loan in order to help fill in the
gaping holes in the budget.

"If we don't get the loan, where will we get the funds to
finance the deficit," Faisal said.

However, he conceded that the country's overseas sovereign
debt of around $80 billion was already of alarming proportions.

Separately, senior banker I Nyoman Moena said that the
approval of the CGI loan had lent certainty to the government's
2001 state budget and that this should be positive for
maintaining sentiment in the overall economy.

He also said that the approval indicated the confidence of the
international community in the government's continued commitment
to economic restructuring and resolving the much-criticized
Attambua killings.

The World Bank, the coordinator of the CGI, and the U.S.
government had earlier threatened to reject the government's
request for more loans unless Indonesia showed firm commitment to
resolving the killing of United Nations staffers in West Timor by
pro-Indonesia East Timor ex-militiamen, and to pressing ahead
with the economic reform program.

The World Bank and the International Monetary Fund have
expressed disappointment over the recent delay in the key sale of
government ownership in the publicly listed Bank Central Asia
(BCA) and Bank Niaga. (rei)