Managing foreign loans

In the last three years the government appears to have been serious in its efforts to confront the problem of foreign loans. This is apparent from the way it has sped up the repayment of loans acquired from the Asian Development Bank (ADB) to the amount of US$625 million.

There has only been three instances of prepayments of foreign loans to date. The first, amounting to US$782.9 million, was made during the 1994/1995 fiscal year on loans extended by the World Bank and the ADB. The following year a similar step was made when the government paid the two international financial institutions US$760,670.

According to the explanation given in an address by Minister of Finance Mar'ie Muhammad at ADB's 29th annual meeting in Manila recently, all this is part of the government's prudent borrowing and foreign loan management policies and is at the same time meant to enhance Indonesia's international credibility.

The explanation given by the finance minister is quite correct considering the fact that foreign loans are among the biggest strains on the Indonesian economy. Care must be taken, since our foreign debts -- both the government's and that of private business -- have reached huge proportions, nearing in fact the US$100 billion mark.

Actually, the problem is not so much in the sum total of debts incurred as in our ability to utilize and repay them. This is the reason the government should strive for better management of our foreign loans, first by ensuring that they are utilized more efficiently and effectively on the basis of a distinct list of priorities.

Aside from that, it is time that we restructure our foreign loans so that we are not overly dependent on currency which may be prone to fluctuations, such as the yen, while most of our export earnings are in American dollars.

-- Bisnis Indonesia, Jakarta