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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