WB expects CGI to give $7b-$8b to Indonesia

WB expects CGI to give $7b-$8b to Indonesia

PARIS (Dow Jones): The World Bank is looking for the
Consultative Group on Indonesia (CGI) to disburse US$7 billion to
$8 billion in foreign aid to Indonesia in the year to March 31,
1999, to help the Asian country meet its budgetary needs.

This money would be on top of $6.2 billion in extra loans
Indonesia received from the International Monetary Fund (IMF) and
other international lenders, including Australia, China, the
World Bank and the Asian Development Bank in mid-July.

The World Bank chairs the CGI which is holding its annual
meeting here.

All told, funds from the two programs to be disbursed this
fiscal year should total between $13 billion and $14 billion.

The CGI is to meet here today and Thursday, with a press
conference to announce pledges and disbursement targets set for
Thursday.

Vikram Nehru, the World Bank's economist for Jakarta, said,
"the disbursement goals are budget led. If the target is a
deficit for fiscal 1999 of 8.5 percent of GDP, that's roughly
equal to $8 billion, if the rupiah is trading at Rp 10,000" to
the dollar.

The Indonesian government has set an end-of-year exchange rate
target of Rp 10,000 to the dollar. Late in Asian trading, the
dollar was Rp 13,650.

"Then you add in $4 billion for government payment for
amortization of external debt... and a comfort margin of $2
billion, and that is how you arrive at a financing need for this
year of $14 billion," Nehru told a press briefing yesterday.

Nehru noted that the estimated dollar amounts needed by
Indonesia depend on a number of uncertain factors. For the
estimates to be correct, among other items, Indonesia's gross
domestic product must shrink in 1999 by no more than 15 percent,
banking sector reforms must be successfully carried out, and the
June agreement on private debt restructuring must be successful.

Indonesia is currently engaged in a roadshow to convince both
debtors and creditors to sign up for a $64 billion debt
restructuring agreement that would relieve the crushing foreign
debt burden on Indonesia's companies and banks.

Indonesia's crisis is domestic, which in turn is being driven
by massive, short-term and unhedged debt -- much of which is
corporate, Nehru said.

Turning to the administrative burden of disbursing such a
large amount of money, Nehru said Indonesia would increasingly
try to use a system of sending money directly from the capital to
regions, rather than having the money flow through ministries.
"There is a lot of untapped capacity in the regions (to place the
funds)," he said.

Nehru added that if one believes that Indonesia's economy will
stabilize in fiscal year 2000 and grow slowly after that, "it
will take until 2005 before the per capita annual income reaches
the level it was at in July 1997."