Indonesia rejects loan offer from S Korea

President Susilo Bambang Yudhoyono said that the Indonesian government would not use external loans to reinforce its fiscal financing although the South Korean government had offered assistance.

"If there is no urgent need, we should not necessarily borrow money although South Korea has offered us a loan," the president said here before leaving South Korea for Jakarta, on Tuesday.


He said that although the ratio of Indonesia`s external debts to its gross domestic product (GDP) continued to drop it did not mean that the government should be lured to unnecessarily create new debts.

"We already have the Chiangmai initiative and multilateral reserve facilities that could be used for a swap arrangement. For sure, we have a second defense in the financial credibility," Yudhoyono said.

He said that calculations on how much debts were needed to stimulate growth and cover budget deficit were carefully made because debts could become a short-term solution but in the long run could turn into a burden.

Yudhoyono said that the ratio of Indonesia`s external debts to its gross domestic product continued to narrow from 53.4 percent in 2004 to 32 percent in 2009.

Earlier, South Korean President Lee Myun Bak at the opening of an ASEAN - South Korea meeting offered additional loans to ASEAN member nations which could be used to develop their economy and infrastructure.

Lee offered a loan ceiling increase under the Official Development Assistance (ODA) scheme to US$400 billion in 2015 so that ASEAN economies could be strengthened.
Minister for National Development Planning / Head of National Development Board (Bapennas) Paskah Suzetta said on Tuesday that the government still needed Rp10 trillion to cover the deficit of its 2010 state budget which is predicted to increase from 1.3 percent to 1.5 percent.

He said that every 0.1 percent of deficit the government had to prepare US$500 million or Rp5 trillion. Thus, if a 1.5 percent increase is added to the budget the government would need Rp10 trillion to cover the deficit.

"The government would do its best to save on expenditures in order to cover the deficit, however. If it is not enough the government would take from external debts through a loan scheme or the issuance of bonds," the minister said