RI will not seek debt relief: Kwik

RI will not seek debt relief: Kwik

JAKARTA (JP): Coordinating Minister for Economy, Finance and
Industry Kwik Kian Gie reiterated on Wednesday that the
government would not seek debt relief from its international
lenders at an upcoming donors meeting in February.

Kwik said that seeking a debt haircut would cause Indonesia to
become isolated from the world and cut off the country from badly
needed external financing sources.

"A haircut would only be possible if all the people of
Indonesia wanted to live miserably," he told reporters following
a meeting of representatives of the Consultative Group on
Indonesia (CGI), the country's major donor grouping.

"The scope of the misery could not be estimated. Once we ask
for a haircut, then at the same time Indonesia would be isolated
from the world and the inflow of funds would stop," Kwik said.

"It wouldn't be the end of the world but Indonesia would
suffer deep misery," he added.

Several leading non-governmental organizations have stepped up
pressure on the government to seek debt relief on the grounds
that some 30 percent of sovereign loans had been pillaged by the
previous administration of former president Soeharto.

Indonesia's sovereign loans are estimated to have reached some
US$70 billion.

Kwik said the new government of President Abdurrahman Wahid
was determined to be effective in the utilization of foreign
loans and to prevent corruption.

He said that this issue would be at the top of the agenda at
the Feb. 1-2 CGI meeting which will be held in Jakarta for the
first time.

Asked to disclose the amount of foreign loans the government
would seek from CGI, Kwik said that it was still being
calculated.

Kwik reiterated, however, that while the government was
determined to lower the country's dependence on foreign loans, it
could not be done immediately.

"In the short term, it's not possible for Indonesia to reduce
its debt as we need funds to stimulate the economy and to drive
the recovery," he said.

Kwik said that the current government had changed the attitude
toward foreign loans.

"Previous governments were happy if at every CGI meeting the
country could have larger amounts of loans. But the new
government will be happy to get a smaller amount of loans at the
upcoming CGI meeting," he said.

Kwik said that the external financing needs of the 2000 budget
could be fulfilled by the three traditional lenders which
included the World Bank, the Asian Development Bank (ADB) and
Japan.

"Given the budget outlook, we will still need significant
budget support for the coming fiscal year," Kwik said, adding
that much of this could be financed by "commitments already
made."

"While there is likely to be a small residual gap, I am
pleased to note that initial contacts suggest this will be
covered by the World Bank, the Asian Development Bank and Japan,"
he said.

He said that the budget deficit next year was estimated at 5
percent of gross domestic product.

Kwik also said that in a bid to reduce dependence on foreign
loans, the government had canceled some $1 billion in loans
already committed by the World Bank and the Asian Development
Bank for the current budget.

He added that the new government was determined to lift the
country out of its economic crisis by pressing ahead with
economic reform programs.

"Developing a sound economic program that will place Indonesia
well on the road to recovery is perhaps the greatest initial test
for the new government," Kwik said in a statement delivered at
the CGI representatives meeting, which was held at the World
Bank's Jakarta office.

Kwik reiterated that the government and the International
Monetary Fund (IMF) were designing a new three-year economic
program to be financed by the IMF.

Kwik said that in the area of banking reform, the government
was committed to completing the reorganization and
recapitalization of all of state banks by June 2000.

"At the same time, we plan to have complete the reorganization
and consolidation of nationalized banks and closed down banks by
September next year," he said.

"Following the reorganization and recapitalization, we will
move forward with a vigorous program to privatize the banking
system," he said.

He said that the privatization process would begin with an
initial public offering of the nationalized Bank BCA by February
2000.

"We will then proceed with majority divestment of key state
banks and other nationalized banks," he added.

Kwik also stressed the important role of the Indonesian Bank
Restructuring Agency (IBRA) in raising funding to help finance
the country's bank recapitalization program.

He reiterated that the bank recapitalization program next year
would require gross interest payments amounting to some 4 percent
of gross domestic product, absorbing more than 10 percent of the
government's 2000 state budget. (rei)