RI's high deficit still acceptable: WB official
RI's high deficit still acceptable: WB official
JAKARTA (JP): Dennis de Tray, the representative of the World
Bank here, said that Indonesia's widening current account deficit
remains under control.
He said that the deficit still poses no serious problem
because it is largely the result of increases in imports for
productive activities rather than increases in spending on
consumer products.
"The deficit is growing because more people are investing in
infrastructure and productive businesses activities, which in the
future, will not only generate more exports but also reduce
imports," he said.
He said that, in contrast, the worsening of the current
account deficit of most Latin American countries in the 1980s was
mainly caused by a sharp increase in their spending on consumer
products.
"But this is not the case with Indonesia as far as I can
tell," he told reporters during a break in a World Bank-sponsored
conference on infrastructure.
The three-day seminar, which was officially opened by
President Soeharto Monday, featured senior government officials
and noted business executives from a number of Asian countries.
The expected Indonesian current account deficit was revised
upward to $8.75 billion in 1996/97 fiscal year from an earlier
estimate of $6.9 billion, due to increasing imports.
The increase in the projection of the current account deficit
in this fiscal year, which will end next March, sent an alarming
signal to economic observers.
Economists said that the government should be able to curb
imports and reduce commercial borrowing from international
institutions to control the sharp growth in the deficit.
The failure to curb the growth of the deficit would be fatal
for Indonesia, according to the economists, whose foreign loans
have already reached the alarming level of around $100 billion.
Sixty percent of these are owed by the government.
Senior economist Sumitro Djojohadikusumo said recently that
the foreign debts were already at a critical level because
Indonesia has to spend 32 percent of its export revenues on debt
repayment.
Sumitro said that serious efforts were very much needed to
reduce the debt-service ratio to at least 25 percent by the end
of the Sixth Five-Year Development Plan period in 1999.
De Tray said yesterday that the government's policy of curbing
commercial borrowings from overseas is a good measure to slow
further growth in the deficit.
"It is a useful instrument even though it is not 100 percent
effective because more and more debts are still coming through
private participants," he said.
He reiterated that the increase in offshore borrowing would
not become a serious problem as long as the debt instruments are
used to support productive activities. (rid/hen)