WB sees RI's debt service ratio level still manageable

JAKARTA (JP): World Bank country director Dennis de Tray said on Thursday that Indonesia's nearly 50 percent debt service ratio in the current 1998/1999 fiscal year was still manageable, although it had risen to an alarming level.

De Tray said that the government had no better options than to secure external official loans, including from the World Bank, to finance the various economic reform programs and the social safety net programs which would help the poor survive the 18- month long economic crisis.

"Indonesia has to accumulate huge foreign debts because of the economic problems," he said.

He added that plugging the huge budget deficit through domestic financing by printing money was a bad option as it would only create more hardships, particularly an uncontrollable inflation rate.

De Tray was speaking to a small group of reporters, explaining the bank's programs and priorities for the country.

"It's still manageable," he said when asked to comment on the country's alarming debt service ratio level.

Finance Minister Bambang Subianto told the House of Representatives on Tuesday that the debt service ratio -- the ratio between debt servicing and export earnings -- might reach 49.3 percent in the current fiscal year ending in March 1999.

This estimate was higher than the government's earlier projection.

The Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita projected in September the debt service ratio at 44 percent.

Bambang said that the new projection was based on forecasts of the principal and interest payments of sovereign and private debts amounting to US$27.19 billion this year, and the total predicted export earnings of $55.16 billion.

De Tray said that the Indonesian government, compared to the private sector, had been doing well in managing its foreign debts during the past eight years.

However, he said that although securing soft-term official loans would minimize the debt burden, the large size of the debts would surely affect the country's capacity to finance future activities.

"We're struggling with this problem," he said. (rei)