Soeharto welcomes US$5.3 billion CGI aid pledge

JAKARTA (JP): President Soeharto yesterday welcomed the US$5.3 billion aid pledged for this year by donor governments and international lending agencies under the Consultative Group on Indonesia (CGI).

Minister of Finance Mar'ie Muhammad, quoting Soeharto, said Indonesia was grateful for the international community's continued trust.

"This is evident from the aid pledged to us, the amount of which reaches almost $5.3 billion," he said after meeting the President at the Merdeka Palace.

He was accompanied by State Secretary Moerdiono and Deputy Chairman of the National Development Planning Board, Rahardi Ramelan.

Mar'ie said that the aid -- slightly higher than the $5.26 billion pledged last year -- would be used in the "most responsible way".

"This means we will use this aid ... to improve people's welfare, including through the development of economic infrastructure facilities, particularly in regions outside Java," he said.

He said members of the CGI had a lot of confidence in Indonesia's management of its economy.

The pledges were announced Thursday at the conclusion of a two-day CGI meeting in Tokyo.

The World Bank pledged $1.5 billion and the Asian Development Bank, $1.2 billion. The two are the largest financial institutions grouped in the CGI.

The World Bank chairs the CGI whose members include 18 donor nations and 11 financial institutions.

Japan was the largest donor nation with 213.74 billion yen ($1.88 billion).

Mar'ie said Indonesia would continue to speed up the repayment of high-interest loans.

Indonesia has expedited the repayment of $3.5 billion in high- interest foreign debts and is in the process of doing so to another $1 billion it owes the United States.

"This means we have so far accelerated the repayment of $4.5 billion of our foreign loans," he said.

Mar'ie said CGI members appreciated these moves, which, he said, were part of the government's prudent debt management program. Such moves also helped reduce the government's debt to service ratio, he said.

Indonesia's debt to service ratio -- the ratio of foreign debt servicing to export revenue -- stood at 34.2 percent in fiscal 1996/1997.

The government wants to reduce the country's debt service ratio to a healthy 25 percent by 1999.

Rahardi said most of the aid would be used to develop infrastructure facilities in eastern Indonesia, remote areas and parts of Java.

Mar'ie said the President had asked ministers yesterday to refrain from unfair bidding practices when running development projects.

"(The President) reminded them not to 'ration' the number of projects that are openly tendered," he said.

On the currency rate, Mar'ie said he was confident the rupiah would continue to receive little pressure from speculative attacks.

Thailand and the Philippines have had to devalue their curren cies following speculative attacks. Shortly after the devaluation of the Philippines' peso, Bank Indonesia widened the dollar- rupiah band, in which the rupiah can float before the central bank intervened, to 12 percent from 8 percent.

"Attacks on the rupiah are small compared to those on the (Thai) baht and the peso because we have long applied a floating and controlled system in managing foreign currencies, which means we allow the market to take over," Mar'ie said.

By increasing the intervention spread the rupiah would remain flexible, he said.

In Tokyo, Bank Indonesia Governor Soedradjad Djiwandono was quoted by Reuters as saying that he was not targeting an exact depreciation level for the rupiah.

"It is getting more complicated, we cannot use a simple, linear way of thinking," he said when asked whether the central bank would maintain its 5 percent annual depreciation level.

"We are not working like mathematicians to make it exact," he said.

"It is difficult for me to answer with a convincing word ... because the issue is complex, not just black and white."

Soedradjad said central banks in developing countries could not just concentrate on one issue such as inflation like their developed country counterparts.

"I believe that the financial and monetary sectors have to support and facilitate the real sectors," he said. (pwn)