RI told to continue reforms to win CGI financial support

Dadan Wijaksana, The Jakarta Post, Jakarta

Indonesia would have a good chance of securing a greater amount of loans from the Consultative Group on Indonesia (CGI) next year as long as the country remains committed to implementing economic reforms, said the International Monetary Fund (IMF) Wednesday.

Head representative of IMF in Indonesia, David Nellor, commented that if the government showed resolve in their actions toward reforms, the international community may indicate that they would provide additional support.

Nellor recalled the CGI meeting last year, in which creditors agreed to channel a significant amount of loans in return for progress in reform programs.

"Some of those funds were conditional. In other words, the funds would be provided only if there is progress in certain areas of reform. And that would probably be the case (again) for next year."

The CGI, which is a group consisting of Indonesia's main traditional donors including multilateral lenders like the World Bank and the Asian Development Bank, is scheduled to convene early next year to discuss the financing needs of Indonesia for the 2003 State Budget.

The 12th annual meeting was initially slated to be held at the end of the month, but has been delayed until January because of the Oct. 12 Bali bombing incident. The government is now seeking a larger amount of loans from CGI than initially projected to help finance an economic stimulus package to cope with the severe economic impact of the Bali blast.

Nellor's remarks reaffirm an earlier statement by the World Bank which indicated that the CGI would most likely provide the requested additional loans.

Without mentioning exact figures, the World Bank, which will chair and host the upcoming CGI meeting, has said that the new loans may need to be increased by "a few hundred million dollars."

The announcement was made early November when CGI members and the government met for an informal meeting to discuss the impact of the Bali blast, as well as ways of helping Bali to recover from the subsequent slump in its tourism sector. Bali was renowned as the country's most popular resort island.

To help minimize the impact of the terrorist attack on Bali, the government plans to inject the economy with some Rp 10.6 trillion (US$1.19 billion) in a stimulus package by raising development spending for 2003 from Rp 54.4 trillion to Rp 65.1 trillion.

However, a higher-than-expected spending would consequently enlarge the 2003 State Budget deficit, for which the extra CGI loans would be needed to cover.

Under the newly approved 2003 State Budget, the government targets to secure around Rp 29.2 trillion in foreign loans, compared to Rp 26.1 trillion as previously proposed.

Aside from providing additional loans to finance the economic stimulus package, talks on providing financial support for the country's easternmost province of Aceh would also be high on the CGI's agenda.

According to Mahendra Siregar, an expert at the office of the Coordinating Minister for the Economy, discussions over the financing needs for Aceh would follow up on an earlier meeting between the government and creditor nations in Tokyo, which outlined the readiness of donors to help finance the province's economic recovery.

However, Mahendra went on, any agreed amount of aid would supersede the agenda that had been previously arranged.

International support for Aceh has been encouraging, following the recent signing of a truce between the government and the Free Aceh Movement (GAM), which is expected to put an end to the decades-long conflict.