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The country may have to borrow up to US$35 billion during the
next three years to help finance its development needs and plug the
budget deficit, the National Development Planning Agency (Bappenas)
says.
Government agencies and the regions have already proposed the figure
for the 2006-2009 national borrowing strategy that Bappenas is
drafting, and with continuing financing needs, the government is
targeting a debt ratio of 31.8 percent of gross domestic product by
2009.
"We're still optimistic in reaching the target, but it will no longer
be a must, especially when there are still many development needs --
like those of state power firm PT PLN -- and as long as the development
projects are beneficial for growth," Bappenas deputy for development
financing Lukita D. Tuwo told Antara.
PLN is projected to need up to $13.3 billion during the next three
years to upgrade its power plants and develop the national power grid.
Other proposals, meanwhile, include $4.5 billion for capacity building
and equipment upgrades for the National Police.
The government will also have to resort to other means to finance the
budget deficit, with revenues from privatization likely to decrease in
their contribution in the future, and the issuance of more government
bonds being limited, due to an upcoming peak of maturing bonds between
2007 and 2009.
Lukito, however, said Bappenas would borrow carefully and only for
projects that were feasible and approved together with the Finance
Ministry.
"We'll probably approve only half of the proposed projects," he said.
"And from that, not all will actually be realized."
This is because Indonesia needs between $3.2 and 3.6 billion annually
in program loans, project loans, and export credit facilities. Of the
sum, only between $1.7 and 2.9 billion is actually absorbed each year.
The government has projected a total of Rp 37.6 trillion ($4 billion)
in foreign debts and Rp 35.8 trillion in net government bond sales in
the revised 2006 state budget, and Rp 40.3 trillion and Rp 40.6
trillion, respectively, for 2007.
With foreign debts are always a politically sensitive issue, in the
medium term the government aims to bring down Indonesia's debt ratio
from 48 percent of GDP last year, to 43.9 percent this year and 39.5
percent in 2007, until 31.8 percent is achieved by 2009.
It also plans to shift the burden away from foreign sources to
government bonds.
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