RI needs borrowing strategy
RI needs borrowing strategy
Tony Hotland, The Jakarta Post/Jakarta
The government must establish a "country borrowing strategy" and
improve the distribution mechanism of foreign loans to regional
administrations to ensure the efficient and effective use of the
loans in the future.
Prasetijono Widjojo, deputy for development financing at the
National Development Planning Board (Bappenas), said on Thursday
that the strategy should include a loan management mechanism and
specific types of programs to be financed by the foreign loans.
"First, we have to strictly identify what we need the loans
for. The government needs to keep in mind that a loan, soft or
not, is still a debt that we have to repay," he said during a
seminar held by the Indonesian Economists Association (ISEI).
Furthermore, he added, the government should be able to
monitor the effectiveness of the use of the loans, based on the
criteria of measurability, accountability and cost recovery.
"Also important is to identify the exit strategy of the
(foreign) loan so that it won't be perpetual, the transparency of
each project to be financed, and to quickly recognize possible
project failures," Prasetijono said.
He stressed that such a strategy was crucial to ease pressure
on the state budget, and in the efforts to set aside higher
financing for development purposes.
He explained that several problems remained in effectively
using foreign loans, such as the absence of a specific
institution that managed loans to boost coordination, the poor
planning of the intended projects, and the ineffective use of
bonds.
Debt-trapped Indonesia has been mired in billions of dollars
of debts and forced to practice tight fiscal policies over the
past few years to increase revenue, mostly from taxes, to repay
the debts.
The tight policies, analysts say, are some of the factors that
deters investors from investing in the country due to the lower
revenue margin they could collect.
According to Bappenas data, the government's foreign debts
currently stand at US$80.91 billion, which is 32 percent of the
gross domestic product (GDP). The figure is higher than in 2002
($74.49 billion, or 35 percent of GDP), and in 2001 ($69.40
billion or 42.8 percent of GDP).
The debt ratio to GDP started to show a declining trend in
2000, but was largely attributed to higher economic growth rather
than declining debts.
Most of the debts, according to the data, are allocated for
the development of infrastructure, especially in the
transportation and energy sectors.
Based on the composition, 35.65 percent of the government's
debts for the last 10 years are from bilateral loans, followed
with 27.77 percent from multilateral institutions, except the
International Monetary Fund, while the rest are mainly from
export credits.