Why we need foreign aid

Why we need foreign aid

From Media Indonesia

Unlike relief aid for the casualties of natural disasters,
"foreign aid" refers more often to monetary loans rather than
grants. We have to return the foreign aid we get, the repayment
of which is included debt servicing expenses under the state
budget.

Why does our government need such foreign aid?

The most basic reason is that the government's finances are
barely adequate to cover all of its development programs and
activities.

By official declaration the foreign aid plays only a
supplementary role. As the years have passed, however, the
external loans meant in the beginning to support the domestic
development program have become a burden. The repayment
obligation become heavier with each year. From the first to the
fifth five-year development programs (Pelita), 1969-1994, the
amount required for external debt servicing increased by 37.1
percent per year on average.

In the run up to the imminent Consultative Group for Indonesia
(CGI) meeting in Paris from July 7 to July 8, 1994, economists
have expressed concern over the total value of our foreign debt,
which they say is approaching the "psychological threshold
amount" of US$ 100 billion. Certainly Indonesia's economic policy
makers ought to note this.

The donor countries do not extend loans to developing nations
solely for economic reasons. Basically they are motivated by
various strategic, political and ideological interests, although
outwardly they would seem to give aid for the moral and humane
reason of helping the Third World.

In my opinion, our country needs to take steps to free itself
of dependence on external debts, which should include the
following:

* The role of foreign loans in the budget should be reduced by
decreasing total amounts through belt-tightening measures.
Funding priorities should be sharpened under the declared
government principle of financial prudence. As long as we still
need foreign loans we should get more choosy about the donor
countries which, like it or not, are restrictive regarding the
policies of recipient countries.

* Revenues from domestic sources should be optimized,
particularly by raising more taxes through more effective
collection and expanding the number of taxpayers. In this regard
the possibility of "collusion" between taxpayers and tax-
collectors should be kept to a minimum, a factor that would boost
public trust in the taxation system itself.

SUDARTO

Jakarta