RI NEEDS STAND-BY LOANS IN CURRENT GLOBAL

By Andi Abdusslam

Jakarta, March 13 (ANTARA) - The Indonesian government is making several approaches to world financial institutions to obtain US$5.5 billion in stand-by loans to realize its idea of establishing a Public Expenditure Support Facility (PESF).

        The PESF is one of the Indonesian government's efforts to deal with the impact of the current global financial crisis and part of a series of comprehensive steps designed to overcome the challenge.

        "The government will continue to pursue policies affecting the fiscal field. The PESF is a contingency plan to maintain the international and domestic markets' confidence and to boost the country's capacity to seek funds needed to finance development," Finance Minister Sri Mulyani Indrawati said.

        The government could access stand-by loans and bond securities made available in the facility to finance its infrastructure, social and other important programs when markets could not provide the needed funds at a reasonable cost.

        Besides trying to secure stand-by loans, the government also is seeking funds through issuing global bonds, including retail Islamic bonds (sukuk).

        The government is planning to issue sharia-based bonds to help plug its state budget deficit. Head of the Finance Ministry's fiscal policy Anggito Abimanyu said recently the government had issued global bonds (SUN) in order, among others, to help cover the budget deficit of Rp139.5 trillion.

        According to the director for sharia financing of the directorate general of debt management affairs of the Ministry of Finance, Dahlan Siamat, the government had been planning to issue retail Islamic bonds since 2008 but it had not yet been realized until now.

        But analysts say it is better for Indonesia to obtain funds by borrowing from overseas lenders rather than by issuing bonds. Now is not a good time because the world economy is still fraught with uncertainties.

        "It is not an appropriate time for the government to issue global Islamic bonds amid the current economic uncertainties where risks have the potential to continue to develop," chief economic and market analyst of Citicorp for Asia Pacific, Johanna Chua, said here on Thursday.

        After all, many global companies or countries are issuing global notes to help fund their crisis-affected economies. Amid uncertain economic conditions, the government has to set high yields for its global Islamic bonds in order to be able to attract investors, let alone if the bonds carried a long tenure.

        Almost all countries at present are competing to obtain funds from the global market. Moreover, the United States is also in need of funds to help recover its losses due to the on-going economic crisis.

        "This is less favorable for us," Johanna Chua said.

        According to Chua, it would be better for Indonesia to use facilities already made available by the International Monetary Fund (IMF). "The facilities which are set aside for developing countries have not yet been utilized by developing nations. This can be used by Indonesia," she said.

        At this time, according to a bank official, the amount of the government's external debt is still safe and even having a positive impact on the monetary sector, particularly the rupiah's exchange rate.

        "In a situation like now, stand-by loans have a positive impact on the monetary sector because they will increase our capacity to stabilize the rupiah's exchange rate in line with the increase in foreign exchange reserves," Bank Indonesia (BI) director for monetary policy Made Sukada said here on Friday.

        He said the ratio of foreign loans to the gross domestic products (GDP) was still low so that there was no need to worry about the loans.

        Therefore, according to Johanna Chua, Indonesia could increase its overseas borrowing through multilateral funding institutions or through bilateral cooperation.

        Based on a prediction made by Citicorp, the ratio of Indonesia's external debts to the GDP at 33.6 percent has increased compared with the figure in 2008 which stood at 29.7 percent.

        Indeed, the government is now making several approaches in order to obtain a stand-by loan of US$5.5 billion.

        Earlier, foreign donors actually had confirmed their support to a stand-by loan for Indonesia worth US$5.5 billion for a two-year period.

        Finance Minister Sri Mulyani said the foreign donors would also help realize Indonesia's idea to form the PESF.

        "The World Bank's board of directors on March 3, 2009 approved a US$2 billion loan for Indonesia through a deferred drawdown option," she said.

        Meanwhile, Japan, Australia and the Asian Development Bank (ADB) welcomed the World Bank's decision and confirmed their support to it. Japan will provide some US$1.5 billion, Australia US$1.0 billion, and the ADB US$1.0 billion. ***2*** (T.A014/A/HAJM/A/S012) 20:45/.... )