'RI to repay foreign debts as scheduled'

'RI to repay foreign debts as scheduled'

The Jakarta Post, Jakarta

Minister of Finance Boediono said on Friday that the government
would not reduce the budget allocated for repayment of maturing
foreign debts next year, as such a move would be seen as
defaulting on the debt payment obligation and would result in
serious consequences to the country's overall economy.

He told reporters that the government would repay the maturing
foreign debts as scheduled.

A number of factions in the House of Representatives
criticized the draft 2004 state budget, partly because of the
relatively large allocation toward repaying foreign and domestic
debts, while the budget for development programs was limited.

Under the proposed budget, Rp 44.89 trillion (about US$5.41
billion), or 2 percent of gross domestic product (GDP), was
allocated toward repaying debt principal.

In comparison, spending for development programs is set at Rp
68.10 trillion, which lawmakers said was too small to help create
a stimulus on the economy.

Several major factions at the House demanded the government to
revise the budget to provide greater stimulus, saying that the
4.5 percent economic growth target assumed in the proposed budget
was not enough to create more jobs to help resolve the chronic
unemployment problem in the country.

The House budget committee is scheduled to start deliberating
the proposed state budget early next month.

The government is under pressure to come up with a credible
state budget, including a commitment to ensure the repayment of
maturing foreign debts, to help revive investor confidence in the
economy, particularly because the International Monetary Fund
(IMF) would no longer be playing a major role in overseeing the
country's economic reform program.

The expiration of the IMF economic bailout program will also
make Indonesia ineligible for a debt rescheduling facility from
the Paris Club, which is a key consideration in the development
of the budget. For the past couple of years, Indonesia has been
enjoying around $3 billion in annual debt rescheduling from the
Club.

Investor confidence is crucial not only for attracting badly
needed foreign investments, but also for retaining the support of
the country's traditional donors.

Indonesia would still need foreign loans to help finance the
2004 state budget deficit, estimated at 1.2 percent GDP.