RI urges ADB to aid poor states

RI urges ADB to aid poor states

JAKARTA (JP): Minister of Finance Mar'ie Muhammad called on
the Asian Development Bank (ADB) and other major financial
institutions yesterday to pay urgent attention to the debt
burdens of developing countries.

Speaking at the 29th annual meeting of the bank's board of
governors at its headquarters in Manila, Mar'ie said that a
"definitive final settlement is needed to deal with the mounting
debt burden of Third World nations, especially the poorest
developing countries.

Mar'ie did not elaborate on his proposal but emphasized that
concrete steps to deal with the debt problem should be given
urgent attention.

The debt burden and the debt overhang of many developing
countries, in particular the poorest developing countries, are
far from resolved, Mar'ie said in his speech here yesterday.

The minister, who is also a member of the bank's board of
governors, also called on the Manila-based development bank to
provide more funds with low interest rates or on concessional
terms to Asia's poorest countries.

He said that Asia sill had most of the world's poor even
though some of the countries in the region had seen rapid
development over the last decade.

"For those countries and for social projects generally, there
is a need for concessional loans," he told the meeting, which was
also attended by Bank Indonesia Governor Soedradjad Djiwandono.

Speaking about Indonesia's macro-economic policy, Mar'ie said
that reducing the current account deficit and curbing
inflationary pressures remain priorities in the current 1996/97
fiscal year.

In addition, he said, the government would continue to speed
up the repayment of high-interest foreign loans in a bid to
reduce its external debt burden.

In the current fiscal year, the government would prepay high-
interest loans of around $625 million provided by ADB, he said,
adding that funds for the loan prepayment would come from the
surplus in the 1995/96 state budget.

"With this development, our prepayments to the World Bank and
the ADB will reach a total of $2.14 billion," he said, adding
that this prepayment would save around $500 million.

In previous fiscal years, the government had financed the
prepayments of high interest loans (carrying annual interest
rates of 10 percent and above) with the proceeds from the partial
divestment of its shares in state-owned companies, including PT
Indosat, PT Telkom and PT Tambang Timah, which are now listed on
overseas and local markets.

The government's outstanding foreign debts reached a total of
$59.96 billion last December.

Of these outstanding debts, $23.65 billion were obtained under
bilateral arrangements, carrying an average interest rate of 2
percent per annum. 19.24 billion's worth of loans were entered
into under multilateral deals, with an average interest rate of 7
percent per annum. The remaining loans were in the form of export
credits, leasing arrangements and commercial credits, carrying
interest rates of above 7 percent per annum.

In his speech in the ADB meeting, the minister also spelled
out the Indonesian government's strong commitment to dealing with
the country's widening current account deficit.

He said the government would further curb the sharp increase
in imports to reduce the current account deficit which, in
1995/96, rose to $7.9 billion from $7 billion in 1994/95.

Imports grew by 27.4 percent last year as the result of sharp
increases in domestic demand.

The country's overall balance of payments, however, remained
in surplus despite the widening current account deficit, Mar'ie
said, explaining that the surplus in the country's balance of
payments was due to large net capital inflows into Indonesia.

"The government has accorded reducing the current account
deficit and controlling inflation top priority," he said.
"Measures which began last year will be continued and intensified
this year."

On the fiscal side, the minister said, the government had also
taken steps to increase revenues, while restricting expenditures
to the planned levels.

He said that steps have also been taken to curb demand through
more prudent monetary management, reducing the money supply by
optimizing the use of the central bank's open market instruments.
(hen)