RI deserves CGI support: IMF
Berni K. Moestafa, The Jakarta Post, Jakarta
The International Monetary Fund (IMF) promised a helping hand in Indonesia's bid to secure some Rp 35.4 trillion (about US$3.7 billion) in new loans from the Consultative Group on Indonesia (CGI), as the Fund said it would suggest donor countries lend their support to Indonesia.
The IMF's senior resident representative in Jakarta, David C. Nellor said on Tuesday Indonesia deserved support from the CGI.
Although not a member of the group -- which includes many donors from industrialized countries, the World Bank and the Asian Development Bank (ADB) -- the IMF would present its view on the Indonesian economy before participants of the CGI meeting, Nellor said.
"One of the elements (in the presentation) is the 2002 budget. It requires external financing, and we will argue that it deserves that support," he told reporters after a meeting with Coordinating Minister for the Economy, Dorodjatun Kuntjoro-Jakti.
Nellor's statement came after the World Bank on Monday warned of increasingly wary donor countries, annoyed by Indonesia's poor track record in meeting reform targets.
The government hopes to secure some Rp 35.4 trillion in loans from the CGI, that would help it finance the deficit in the 2002 state budget.
The deficit is estimated at Rp 42.1 trillion, which represents about 2.5 percent of the country's gross domestic product (GDP).
External financing from the CGI is expected to cover most of the gap, while domestic financing from privatization and asset sales should cover the balance.
According to Nellor, support from CGI members does exist.
Earlier last month, a senior government official told local newspapers that Japan was ready to pledge some US$1.4 billion, the World Bank some US$1 billion and the ADB between US$600 million to US$1 billion.
But thus far, none of the lenders confirmed the amount they would pledge during the CGI meeting.
The World Bank said the amount of its commitment depended on how the government was planning to use the funds.
"Donors will be interested in hearing what the government's plans are and how they propose to implement the various policies they've announced," Nellor explained.
He was referring to, among other things, the 2002 state budget, which the World Bank previously described as sound and realistic.
"What people will be looking at is if there is a critical mass of policies which will enable the economy to grow," Nellor said.
He said meeting the donor countries would also allow the government to explain the challenges it faces in implementing reform programs.
And there is no shortage of challenges confronting the recently-installed government in its attempt to reform the economy.
Privatization and asset sales targets, and the lack of action so far, are weighing heavily on foreign investors' appetite for Indonesian assets.
Chronic problems at home, ranging from anti-Western sentiment, legal uncertainties, and political instability, have dampened interest with regard to Indonesian companies.
Adding to this, is the accelerated downfall of the global economy since the Sept. 11 terror strikes in the United States.
The entrance of foreign investors is vital to offset domestic investment, which has been sharply down since the financial crisis hit the country in 1997.
Investment from the private sector has become important, given the government's limited ability to stimulate economic growth.
Massive debts cripple the budget's spending ability, forcing the government to rely on private investors to drive the economy.
Indonesia's total debt stands at some US$137.6 billion as of last August, of which US$74 billion is government debt.
Yet new loans from the CGI coupled with debt rescheduling under the Paris Club agreement are necessary to lend next year's budget some degree of stability.
For this year's budget, the significance of today's CGI meeting is to build confidence, according to a former IMF senior official.
Chairman of Deutsche Bank Asia, and former IMF Asia Pacific Deputy Director, Hubert Neiss said foreign investors use the CGI meeting to gauge Indonesia's reform progress.
"Private foreign investors still largely take a wait and see position....they will come a bit later, now is the time for official donors to support," Neiss told reporters in a press conference to introduce Deutsche Bank's new chief country officer, Suresh L. Narang.
A successful meeting of the CGI, he said, was bound to result in a confidence boost among foreign investors.
Analysts said regaining confidence was vital if the government hopes to succeed with its privatization and asset sales program this year.
This success rests largely on pushing ahead with the sale of PT Bank Central Asia (BCA) and cement company PT Semen Gresik.