Indonesia asks for $1.2 billion loan from World Bank

The Jakarta Post ,  Jakarta   |  Sat, 04/19/2008 12:24 PM

The government plans to borrow US$1.2 billion from the World Bank to help cover the state budget deficit that is expected to reach 2.1 percent of GDP or $10.3 billion, an official said.

The Finance Ministry's director general for debt management, Rahmat Waluyanto, told The Jakarta Post on Friday the World Bank loan would make up part of the $2.9 billion loans expected from foreign creditors.

"We are currently negotiating the terms and conditions with all of the creditors," Rahmat said.

Other creditors include the Asian Development Bank with $1.1 billion and the Japan Bank for International Cooperation with up to $600 million, which will in part be used to handle problems related to climate change.

"The JBIC and Indonesia have established a commitment to set aside $300 million for issues related to climate change. A portion of the $2.9 billion loans this year will be used for that," Rahmat said.

A contract with the World Bank, he said, would be signed in May for the first disbursement of the total loan, starting with $200 million that would be used as part of the government's infrastructure development plan.

According to Rahmat, the government was supposed to receive the "infrastructure loan" last year, but it was canceled because the government failed to conclude "pending administration matters" for a previous project funded by the World Bank.

"The problems are solved now. So, we can have the loan disbursed," he said.

According to the newly revised state budget, the government plans to gather $11.7 billion in domestic loans and $4.8 billion in foreign loans.

However, the government also plans to repay $6.7 billion in foreign loans this year, making the total foreign loan balance minus $1.9 billion.

By the end of the year, the government's total income gathered this year to cover the budget deficit will amount to $9.8 billion.

Based on these calculations, the government will have to seek another $500 million to cover the estimated budget deficit, which remains under pressure from soaring crude oil prices.

Rising global oil prices prompted the government to revise the state budget earlier than planned, changing the basic assumption for oil price from $60 a barrel to $95.

With oil prices currently hovering around $110 a barrel in global markets, the government will have to spend more on subsidies, particularly for fuel and electricity.

In the revised budget, the electricity subsidy allocation jumped to $6.65 billion, more than double the original $3.25 billion.

The fuel subsidy shot up to $13.8 billion from $4.6 billion.(lva)

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