JAKARTA (JP): Finance minister Prijadi Praptosuhardjo said on Monday the ratio of the government's total foreign debt to gross domestic product (GDP) was projected to drop to 65 percent in 2003 from the current 99 percent level.
Prijadi said the government would gradually lower the amount of foreign debt by paying up the loan as scheduled as the economic condition improves. ""The efforts show the government's determination in controlling and reducing the foreign debt burden in a sustainable way,"" he told the House of Representatives' plenary session on the 2001 draft state budget.
Prijadi said the debt ratio in 2001 was projected to decline to 86 percent.
Analysts have warned that the reduction of the government's massive debt is crucial to avoid the country plunging into a second crisis.
A failure to reduce the debt burden by 2003 would create a disaster to the state budget because during that year part of the debt owed to the International Monetary Fund (IMF) and the government bank recapitalization bonds would start to mature.
Economists estimated the burden of the 2003 state budget from the maturing bonds and the IMF loan alone could reach a whopping Rp 130 trillion.
The government has issued more than Rp 400 trillion worth of bonds to help finance the recapitalization of the country's banks.
Experts also said the country would not likely get another debt rescheduling facility for debts maturing in 2003 from the Paris Club of creditor nations due to the higher trend in international oil prices.
Prijadi said to lower the amount of foreign loans, the ratio of the annual foreign loan disbursement to GDP would be lowered from 3 percent in 2000 to 2.6 percent in 2001 and 1.6 percent in 2003.
Donors grouped in the Consultative Group on Indonesia (CGI) approved lastweek to provide the country with some $4.8 billion in loan to help plug the2001 budget deficit estimated at around $6 billion or an equivalent of 3.7 percent of GDP.
The government hailed the CGI loan commitment but some analysts and legislators warned the loan would only create more burden to the budget particularly if its conditions were similar to commercial loans.
Elsewhere, Prijadi said the government would not revise its assumptions in the 2001 draft budget as recommended by some legislators.
He said the assumptions were the result of previous consultations with the House budget committee and already reflect the real condition of the economy.
""The government thinks the assumptions are realistic and in line with efforts to create a conducive climate for the sustainable recovery of the economy,"" Prijadi said.
The government assumes an economic growth of 4.5 percent, inflation rate of 7 percent, exchange rate of Rp 7,300 per U.S. dollar, international oil price at $22 per barrel and interest rate of Bank Indonesia SBI promissory notes at 11 percent.
Legislators have recently criticized the budget assumptions, particularlythe exchange rate level and oil price assumption.
Critics said the exchange rate assumption of Rp 7,300 was too optimistic given the fact that the rate was now hovering near the Rp 9,000 level and the unstable domestic social and political conditions.
The oil price assumption had been seen as too conservative since the current oil price level was already at more than $29 per barrel.
""According to Bank Indonesia, an exchange rate of Rp 8,625 per U.S. dollar at the end of September 2000 was still undervalued ... Compared to 1996, the September 2000 rate level had depreciated by around 40 percent ... So there's enough room for the rupiah to appreciate to the Rp 7,300 level,"" Prijadi said.
But he admitted that domestic political stability was a crucial factor.
The government proposed the draft budget earlier this month and the Houseis expected to approve it sometime in November.(rei)