Government Plans More Foreign Loans
Monday, 25 February, 2008 | 15:10 WIB

TEMPO Interactive, Jakarta: The government is planning to increase the total amount of the foreign loan program from Rp4.7 trillion to Rp23.8 trillion this year.

The loans are for financing the Revised 2008 State Budget deficit of Rp86.9 trillion, or two percent of gross domestic product (GDP).

Lukita Dinarsyah Tuwo, Deputy for Development Financing at the National Development Planning Agency (Bappenas), said that Bappenas was optimistic that the foreign debt ratio in the government's mid-term plan would be in line with the target of 33 percent.

This percentage is lower compared to the 2007 debt ratio of between 35 and 36 percent.

“The target for 2009 is 31.8 percent. Seeing the developments that have taken place, we're optimistic the target can be met,” said Lukita at the Bappenas building at the end of last week.

Previously, Indonesia had obtained program loans amounting to Rp19.1 trillion.

These loans were from the World Bank, the Asian Development Bank (ADB) and the Japan Bank for International Cooperation (JBIC).

The loans comprise development program loans, infrastructure development program loans, local government finance reports and climate change program loans.

As regards development program loans, the leader of the syndicate is the World Bank while the co-financiers are the ADB and the JBIC.

The syndicate leader for the infrastructure development program is the ADB, and the co-financiers are the World Bank and the JBIC.

Different to the loan program, in this year's Revised State Budget, project loans are lowered from Rp23.8 trillion to Rp20.4 trillion.

This is because the government is actively reducing foreign project loans as they are expensive.

Lukita went on to say that the government will also propose increasing foreign loan collateral repayment by around 3.2 percent, or an increase of Rp1.9 trillion.

An economic observer from the Institute for Development and Finance, Aviliani, pointed out that the additional foreign loans will burden the budget even more, because the interest to pay is high.

However, she acknowledged the government did not in fact have any other option to cover the budget deficit.

Aviliani suggested that the government optimize its issuance of State Debt Securities (SUN) or Indonesian Retail Bonds.

This is because the government can obtain money directly at a lower cost compared to that of foreign loans.

Dewi Rina | Eko Nopiansyah