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G20 Summit Declaration Reduces Indonesia's Budget Financing Fear

Indonesia's fear about financing of the 2009 budget deficit has been eased following the declaration made by leaders of Group of 20 countries at their meeting in Washington recently, a government official said.

The G20 declaration would enable Indonesia to seek financing sources from non-market sources and therefore worries over difficulties it might face in seeking sources for financing the 2009 budget deficit were reduced, Antara News Agency on Tuesday quoted head of the Indonesian finance ministry's fiscal policy affairs Anggito Abimanyu as saying.

Around 90 percent of the budget deficit had so far been covered by proceeds from bonds the government had issued and sold to the market, he said.

"The crisis in the US has caused international funds to return to the US causing a capital outflow. If they take a counter cyclical action by issuing state bonds, which will certainly be sold out, global liquidity could dry up," he said on Monday.

He said under the condition developing countries including Indonesia would have difficulties in financing their budget because all the funds would go to the US.

"If the bond market is really closed it must be replaced by bilateral or multilateral sources such as the World Bank or the Asian Development Bank," he said.

In the 2009 budget the Indonesian government has set the amount of deficit to be covered through bond issuance at 54.72 trillion rupiah (US$5.4 billion), he said.

The G20 leaders issued a declaration stating 50 steps to be taken jointly to save the world's economy.

"From the 50 steps Indonesia benefits among others the opportunity they provide for financing the budget through non-market sources," he said.

If necessary, he said, Indonesia could also strengthen its foreign exchange reserves through bilateral, regional swap (ASEAN+3) or multilateral (IMF) sources without necessarily having to sign a letter of intent and they are flexible.

"This only applies to countries that have good track records and sound economic policy," he said.

(Xinhua News Agency November 18, 2008)


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