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By Elizabeth Pisani
442 words
18 May 1990
Reuters News
(c) 1990 Reuters Limited

JAKARTA, May 18, Reuter - The Indonesian government will need to borrow more money this year than last but will be able to reduce the proportion it owes to other governments by borrowing more from commercial sources, the World Bank said.

In the annual report on Indonesia circulated to government officials this week, the World Bank recommended that the Inter-Governmental Group on Indonesia lend Jakarta 4.5 billion dollars in 1990-91, up from 4.2 billion a year earlier.

That would put loans from the group of governments and international bodies that lend cheaply to the world's fifth largest debtor at half the country's total borrowing needs in the year to March 31, 1991, down from 62 per cent a year before.

But loans from private sources should fill the gap, shooting up to 1.9 billion dollars from one billion last year and growing to 2.5 billion by 1991-92, reflecting the world's growing confidence in Indonesia's booming economy.

The report was enthusiastic about the private sector's blossoming role in the economy, but said if growth were to continue at its present rate of around eight per cent, Jakarta would have to develop infrastructure badly needed for industrial expansion.

It suggested private companies be allowed to help a creaking state sector provide water, electricity and telecommunications.

Deregulation of finance and trade helped an ailing economy to recover after a slump in the price of oil, the country's lifeblood. Non-oil exports have soared and oil's share of revenues dropped to 38 per cent in 1989-90 from 71 per cent at the start of the 1980s.

Indonesians are not as poor this year as last, but money does not filter evenly through the population of 180 million and the poor are becoming concentrated in remote areas with scant resources and few jobs, the bank said.

Expensive subsidies such as that on diesel oil help the rich more than the poor and the money could be better spent on basic education, health care and water supply, the report said.

Indonesia spent 32 per cent of its export earnings paying off loans last year, meeting its obligations on time thanks in part to a form of lending known as special assistance.

Special assistance is budget support that amounts to gentle debt rescheduling.

On the strength of Indonesia's economic successes the World Bank recommended that special asisstance be cut drastically to 1.2 billion dollars in 1990-91 from 1.8 billion last year and suggested it could be phased out entirely after that.


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