Governments urged special audits on foreign debt management

20 May 2008 by ANTARA News


A non-governmental organization urged the government
to conduct special audits on the management of Indonesia`s foreign debt in
order to ascertain its effectiveness from the viewpoint of the government as
its user and the creditors` responsibility.

"The use of foreign debt must be audited comprehensively and transparently
so that the public will have an understanding of the government`s rationale
in covering state budget deficits with foreign loans," Dani Setiawan,
chairman of the Coalition against Debt (KAU), said here Monday.

The public needed to know not only the benefits of foreign debt but also
that the indebtedness made Indonesia susceptible to creditor country
policies that could have a negative impact on the nation`s social, economic,
cultural and environmental conditions, he said.

Setiawan also asked the government soon to draw up a “more affirmative”
proposal to write off Indonesia`s debt as the government`s foreign debt
restructuring program so far had not succeeded in freeing the country from
its debt burden.

"About 40 percent of the State Budget every year is spent on paying
instalments on the principals of and interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. on the country`s foreign debt.
Because of this situation, the state budget fails to function as an
instrument to respect the people`s basic rights to education and health," he
said.

In Setiawan`s view, the government should also remind the advanced countries
in the G-8 of the commitment they made 10 years ago to forgive poor
countries` debts although the World Bank World Bank
WB
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

and a few other international
financial institutions had put Indonesia in the category of countries
capable of repaying their debts.

"The qualification should not be applicable to odious debt or debt made by a
dictatorial regime such as the New Order government in Indonesia," he said.

Also to be written off should be debt used to carry out projects that were
eventually damaged by natural disasters, that proved unusable because of
planning mistakes or that did not match the people`s needs.

According to KAU, Indonesia`s foreign debt now totaled 136.640 billion US
dollars and the country was paying an average of Rp90 trillion every year to
service the debt. (*)



Published by ANTARA News

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