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.