RI expects lower CGI loan this year

RI expects lower CGI loan this year

Berni K. Moestafa
The Jakarta Post
Jakarta

Indonesia is expecting to receive loans below last year's
figure of US$3.14 billion from creditor countries under the
Consultative Group on Indonesia (CGI), a senior government
official said, citing the lower state budget shortfall for 2003.

Coordinating Minister for the Economy Dorodjatun Kuntjoro-
Jakti said on Thursday the country needed to refrain from
accruing new debts and to cut back its reliance on CGI funds.

"Let's not make the CGI (loans) a habit. We want to reduce
(the loans), as we do with our state budget deficit," Dorodjatun
said following a CGI preliminary meeting at the World Bank office
in Jakarta.

Indonesia uses the CGI loans partly to cover the shortfall in
its state budget, and it is expected that the group will pledge
new loans to help finance the 2003 budget deficit at its meeting
next month.

For 2003, the government is targeting a deficit of 1.3 percent
of gross domestic product (GDP), which measures the total value
of products and services a country produces within a year.

This target would amount to an estimated budget shortfall of
Rp 26.26 trillion (about $2.97 billion), compared to this year's
estimated deficit of Rp 42.13 trillion, or 2.5 percent of GDP.

The government is also targeting a balanced state budget by
2004, thereby reducing the need for new foreign loans.

Last year CGI donor countries pledged loans amounting to $3.14
billion and grants of $500 million. "I don't want more than last
year," Dorodjatun said of the amount of loans he expected the CGI
to pledge next month.

With total debts of about $134 billion, Indonesia is spending
some 43 percent of its 2002 state budget servicing foreign and
domestic debts.

This situation puts a strain on development spending, on which
the country's economic growth now rests because of a lack of
investment from the private sector.

Consequently, the economy lacks the steam to lift about 40
million Indonesians out of unemployment, at a time when nearly 60
percent of the population is at risk of falling below the poverty
line.

Last year's 11th meeting of the CGI took the theme of "working
together to reduce poverty", and Dorodjatun said that poverty
would remain a central issue at next month's meeting.

The meeting is scheduled for Oct. 28 and Oct. 29 in
Yogyakarta, the first time the CGI would meet there.

But as legislators have yet to approve the government's 2003
draft state budget, Dorodjatun said it was difficult to estimate
how much funding was needed from the CGI to cover the deficit.

There are several contentious issues in the draft budget,
including the economic assumptions the government used to
calculate revenue and expenditure in the draft.

"It's tough because the world economy changes fast,"
Dorodjatun said.

Last year's CGI meeting came in the wake of the Sept. 11,
terrorist strikes against New York and Washington, which deepened
the worldwide economic slump.

Now Indonesia finds itself sandwiched between the lingering
effects of Sept. 11 and uncertainties over the global economy due
to war talk over Iraq, resulting in what Dorodjatun said was an
unpredictable environment in which to draft next year's budget.

The Asian Development Bank's principal programs officer to
Indonesia, Shiladitya Chatterjee, said that during Thursday's
meeting CGI members received an update on Indonesia's economy
from the government and the International Monetary Fund (IMF).

The IMF is providing a $5 billion loan package under a program
running until the end of 2003. Compliance with the IMF economic
reform program is necessary to convince the CGI of future loans.

"It seems that everything is going on track but much needs to
be done," Chatterjee said referring to the overall progress of
the Indonesian economy.