Government to Limit Projects Funded Through Foreign Loans

TEMPO.CO, Jakarta - The Head of the National Development Planning Board (BAPPENAS), Andrinof Chaniago, said that his Ministry will begin to restrict the amount of projects that are funded by foreign loans, in order to ensure that Indonesia's foreign debt does not exceed the national fiscal security threshold, as set out in the 2015 State Budget (APBN).

Chaniago added that the request for foreign loans to fund national projects would only be approved if it shows no signs of potentially causing a budget deficit.

The limitation, explained Chaniago, will be outlined and stressed in the government's guideline for foreign loan requests - due to be published in the next two weeks - which will also apply to public-private partnership (PPP) ventures. "We have confirmed and relayed our plan to several related ministers and financial institutions regarding the issue," said Chaniago at his office on Wednesday.

Chaniago stopped short of detailing the total amount of foreign loans which have already been approved by the government to this date. That said, Chaniago said that the majority of foreign loans were allocated towards infrastructure projects, the energy sector, as well as the development of Indonesia's railway network.

That said, the government has said that it prefers foreign loans to fund its' infrastructure development programs rather than through the issuance of bonds, because foreign loans incur relatively less interest - thus making it cheaper to re-pay.

The Deputy Head of International Trade and Relations for the Indonesian Chamber of Commerce, Chris Kanter, concurs with Chaniago. "Businesses too, still prefer to fund their growth by acquiring loans from abroad, because the interests repayments are much lower, as ultimately, all businesses think about are pure profits," said Kanter.

Bank Indonesia's (BI) records show that Indonesia's foreign debt obligation as per January 2015 stands at US$298,7 billion - US$162,9 billion of which is incurred by the private sector. Indonesia received a total loan of US$26,2 billion from international finance organizations - the biggest of which was given by the International Bank from Reconstruction and Development or IBRD (US$12,2 billion), followed by the Asian Development Bank or ADB (US$8,7 billion), and last but not least, the International Monetary Fund or IMF (US$2,8 billion).

PINGIT ARIA | TRI ARTINING PUTRI