Soeharto calls for proper use of state funds
Soeharto calls for proper use of state funds
JAKARTA (JP): President Soeharto yesterday urged officials to use state funds wisely even though the Consultative Group on Indonesia (CGI) had decided to meet most of the government's aid request.
"All government offices should tightly control their spending so that there will be a meaningful surplus in the state budget," he said during a meeting with Minister of Finance Mar'ie Muhammad and a deputy chairman of the National Development Planning Board, Rahardi Ramelan.
Mar'ie and Ramelan reported to the President about the aid commitments pledged by CGI members in Paris Thursday to provide US$5.26 billion in foreign aid to Indonesia for the current fiscal year.
The President said the government would continue to increase domestic funding sources even though Indonesia is still confident of receiving financial assistance from other countries and multi- national financial organizations.
"We will never rely on foreign loans in financing development projects," Soeharto said, adding the government would continue to privatize large state-owned companies to help finance development projects and accelerate repayments of external debts.
Mar'ie told reporters the $5.26 billion committed by the CGI consisted of $2.56 billion in bilateral pledges from 18 donor countries and $2.69 billion in pledges from international financial institutions.
The fresh CGI aid commitment is slightly lower than last year's $5.36 billion, but is higher than the government had expected.
Local economists yesterday had mixed responses to CGI's aid commitment.
Senior economist Sumitro Djojohadikusumo warned that the government should be more careful in managing the country's external loans which are estimated to exceed $100 billion.
He said the country's debt service ratio (a ratio of debt repayments against exports) had reached 32 percent; an alarming level far higher than a 25 percent ideal.
Marie Pangestu, a senior economist at the Center for Strategic and International Studies, said a high debt service ratio is not the only fear.
"The newly pledged aid will of course give a greater financial burden to the government," she told The Jakarta Post. "But more importantly, the government should use the loans properly."
She acknowledged that new financial aid would not have an immediate impact on export-oriented activities which are needed to boost foreign exchange revenue.
"But if they (loans) are used properly they, in the long run, will be able to enhance overall economic activity, including those related to exports," Marie said.
Yogyakarta-based economists said the system managing the country's external debt should be strengthened to curb the negative impact of sharp foreign currency fluctuations.
Mudradjat Kuncoro of Gadjahmada University in Yogyakarta said that foreign loans should receive special treatment, especially those denominated in highly fluctuating currencies such as Japanese yen.
He said appreciation of the yen against the U.S. dollar in the last 10 years had caused an $18.6 billion increase in government debt repayments.
According to a government estimate, Indonesia's external loans reached around $100 billion at the end of last year. Around 40 percent of total credits were owed by the private sector. (hen)
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