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)