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CGI loan provides
certainty to state budget
JAKARTA (JP): The
US$4.8 billion loan pledged on Wednesday by Indonesia's traditional
donors would have a positive impact on the economy as it provides
certainty to next year's state budget, experts said.
Economist Pande Raja
Silalahi said the loan would help plug next year's huge state budget
deficit estimated at around $6 billion or 3.7 percent of the gross
"It is positive
for the economy because it provides certainty to the budget," said
Pande Raja Silalahi, an economist at the leading private think tank,
Center for Strategic and International Studies (CSIS).
Donors grouped in the
Consultative Group on Indonesia (CGI) pledged $4.8 billion in aid for
2001 and planned to provide another $530 million in technical assistance
grants, at the end of their two-day meeting in Tokyo.
But Pande said that
it was still unclear whether the House of Representatives would agree for
the government to take such a huge foreign loan, particularly amid strong
He said that the
House might ask the government to take a smaller foreignloan.
foreign loans are already huge and they have now become a big
problem," he said.
unveiled the draft of the 2001 state budget with an estimated deficit of
around Rp 53 trillion or $7.2 billion based on an exchange rate of Rp
The government has
said the bulk of the deficit would be financed by foreign loans, while
the remainder would be financed by the sale of assets held by the
Indonesian Bank Restructuring Agency (IBRA) and the privatization
assumed an international oil price of $22 per barrel in the draft budget.
But analysts and legislators have said the assumption wastoo conservative
given that the international oil price had been hovering at more than $29
The House and the
government are still debating the state budget draft and are expected to
reach a final agreement sometime in November.
Meanwhile, the CGI's
new loan commitment had little impact on the rupiah or the local stock
The announcement of
the CGI loan commitment helped lift the rupiah from an intraday low of Rp
8,950 to end the day at Rp 8,895 but it was still lower than the Rp 8,845
in late trading on Tuesday.
Dealers said the
rupiah remained under pressure due to fears over uncertainty in the
domestic political development, particularly after the House unveiled its
plan to probe into President Abdurrahman Wahid's possible role in the
After climbing for
two consecutive days, the Jakarta Stock Exchange composite index ended
0.1 percent lower at 416.948 points.
finance minister Bambang Sudibyo welcomed the success of Coordinating
Minister for the Economy Rizal Ramli and his team in obtaining the CGI
loan but questioned the conditions for the loan.
Bambang said if the
conditions were too heavy, the loan would only cause problems for the
He said that although
CGI had always agreed to provide loans to Indonesiaduring the past
several years, the conditions had gradually become heavier. "Before
the (1997) economic crisis, the interest rate of the loan was between 1
percent and 3 percent but now there are donor countries who are demanding
a 5 percent interest rate which is equal to a commercial loan," he
Bambang said that as
an alternative to this loan, the government could push its privatization
efforts and the sale of the IBRA assets.
Most analysts said
that with the approval of the new loan, the governmentmust push its
economic restructuring program, particularly the sale of assets under
recently delayed a key divestment program involving the publicly listed
Bank Central Asia (BCA) and Bank Niaga.
The delay had
disappointed both the World Bank and the International Monetary Fund
which are providing a separate multibillion dollar bailout for the
IBRA controls assets
worth more than Rp 600 trillion. The assets had beentransferred to the
agency from the country's troubled banks and ex-bank owners. (rei