RI receives US$2.4b loans from Japan

JAKARTA (JP): The Japanese government agreed on Friday to provide Indonesia with US$2.4 billion in loans to help finance the country's 1999/2000 budget deficit.

Japan's vice finance minister for international affairs, Eisuke Sakakibara, said that a substantial part of the money would be released before the June general election.

"This financial package is only the first part of the Japanese government's assistance to Indonesia under the Miyazawa Plan," Sakakibara told reporters after a meeting with President B.J. Habibie.

Sakakibara said his government would consider providing additional aid at the next meeting of the Consultative Group on Indonesia (CGI) in Paris in July.

The $30 billion Miyazawa Plan was promised last year by Japanese Finance Minister Kiichi Miyazawa to help revive the Southeast Asian region's crisis-hit economies.

Coordinating Minister for Economy, Finance, and Industry Ginandjar Kartasasmita said Indonesia was the largest recipient of aid in the first phase of the Japanese initiative.

Thailand has received $1.8 billion, Malaysia $1.5 billion and the Philippines $1.4 billion.

Indonesia will need approximately $10.3 billion in foreign loans to finance the 1999/2000 state budget.

Before Friday, the government had secured $4 billion in project financing loans, leaving a shortfall of $6.3 billion.

With the confirmation of $2.4 billion from Japan, the government must now secure $3.9 billion, which Ginandjar said he hoped would be pledged by donors grouped in the CGI at its July gathering.

The CGI groups Indonesia's donor countries and institutions including Japan, the World Bank and the Asian Development Bank (ADB).

"Probably at the CGI meeting, which will be held in the summer, we could discuss additional measures that we can take," Sakakibara said.

He promised to continue looking into Indonesia's financial needs and said he would consider providing further assistance, including short-term financial aid.

Ginandjar had earlier said he expected Japan to provide at least $3 billion, with the World Bank and the ADB each providing $1 billion.

"$2.4 billion out of a $3 billion request, I think, is quite a good number," Sakakibara said.

Ginandjar said the President expressed his thanks, saying he was deeply touched by the Japanese support and that it had been very timely in its arrival.

Ginandjar expressed optimism that the shortfall in the budget would be fully covered by new aid pledged at the CGI meeting.

"However, it would be unfair to put all the burden of financing our budget on Japan," Ginandjar said.

"We are also going to ask the ADB, the World Bank, the IMF and other donors to support our economy," he said.

At a preliminary gathering of CGI representatives in Jakarta last month, the World Bank warned the government to remain true to its program of economic reform if it wanted to retain the support of the international community.

Worries over the program of reform have surfaced as a result of the political debate raging over the bank recapitalization program.

"The recapitalization of the banks is crucial to the recovery of the Indonesian economy," Sakakibara said. "So we support the efforts of Indonesian government to recapitalize their banks. Of course, it has to be done in a very transparent and fair manner."

Sakakibara also commended the government for its efforts to combat corruption in the country.

Miyazawa said in a statement that $1.5 billion of the $2.4 billion loan would be provided by the Export Import Bank of Japan, with the remaining $900 million coming from the Overseas Economic Cooperation Fund.

He also said that Japan would help to subsidize Indonesian interest payments on a loan of $620 million provided by the ADB. (rei/prb)