WB cautions RI on use of CGI funds
WB cautions RI on use of CGI funds
Urip Hudiono, The Jakarta Post, Jakarta
With Indonesia's economy steadily improving, pledges from donors
grouped in the Consultative Group on Indonesia (CGI) could be
used for longer-term development needs, rather than just for
budgetary purposes, the World Bank said.
Nevertheless, the Bank estimates that Indonesia may need up to
US$3 billion in loans and grants from the 30-member group of
bilateral and multilateral donors to help finance this year's
budget deficit.
The figure could still increase in light of the recent tsunami
disaster in Aceh, which the Bank has estimated will likely cost
some $5 billion in reconstruction needs, but which will only slow
economic growth by a slight 0.4 percent.
Speaking on Tuesday while unveiling the Bank's latest economic
report on the country, Work Bank country director Andrew Steer
explained that the current situation was different from that
which prevailed when Indonesia was struggling to recover from the
aftermath of the 1997-1998 crisis.
"Three or four years ago, there was a real financial need to
fill the gap in the state budget, but now it's different," he
said. "The country is now macroeconomically well balanced, and
becoming increasingly economically strong."
Given this, Steer went on, Indonesia -- which has one of the
world's lowest human development indices -- could therefore begin
using CGI funds for longer-term development needs.
"If donors are generous, than more can actually be done," he
said. "More schools can be built, more roads can be built, more
health clinics can be provided."
The CGI starts its two-day annual meeting on Wednesday and
will likely use the report as its main reference in determining
pledges to the country this year.
State Minister for National Development Planning Sri Mulyani
Indrawati recently said that the government was hoping for up to
US$2.8 billion -- about the same as last year -- from the CGI.
The Bank itself will likely provide between $700 million and
$800 million of new loans to Indonesia this year, and up to $100
million for reconstruction in Aceh.
In its report, the Bank has forecast that Indonesia's economy
will grow strongly by an average of 6 percent between 2006 and
2009. This year alone, the economy is expected to grow by 5.5
percent, up from 5 percent last year.
Other macroeconomic indicators are also encouraging, as seen
in the declining trend in the state budget deficit from 1.8
percent in 2003 to 1.2 percent in 2004, and an estimated 1
percent this year.
Regarding debt, the Bank said that Indonesia's debt-to-GDP
ratio reached a relatively secure level of 54 percent as of last
year -- down from around 73 percent in 2003 -- and was on track
to meet the target of 34 percent by 2009.
In 2003, the ratio stood at 74 percent.
Indonesia's poverty headcount had also reached its pre-crisis
level of 15 percent of the total population as of 2003. As for
unemployment, it stood at 8.6 percent in 2004, an improvement
from around 9.5 percent the year before.
"The government has launched several reforms in the financial
legal sector and established an anticorruption unit which has
been deemed as positive by investors," World Bank lead economist
Bill Wallace said.
"However, other policies, such as tax amnesty plans, and weak
bank governance are still causing investors concerns."