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November 26, 2008

Indonesia seeks loan from Australia for infrastructure projects
Indonesia has approached wealthy neighbour Australia for a loan to help it fund vital infrastructure projects in the global economic downturn, Reuters quoted an Indonesian government source as saying Wednesday.

Jakarta is seeking a loan of about $2 billion, Australian newspapers said.

A three-man Indonesian team, including a senior adviser to Finance Minister Sri Mulyani Indrawati, met Australian Treasury officials on Monday to discuss the terms of a loan, the Indonesian source told Reuters when asked to confirm the reports. The source could not comment on the reported loan size.

An Indonesian embassy spokesman in Canberra said a meeting did take place, but refused to confirm details. The source said the meeting took place to discuss "capacity building". No one at Indonesia's Finance Ministry was immediately available for comment.

Indonesia will need around $10.5 billion in budget finance this year. But financial turmoil is making it hard for emerging economies to secure loans as international investors shy away from markets perceived as high risk.

Rahmat Waluyanto, director-general of debt management in Indonesia's Finance Ministry, told China's Xinhua news on Monday that Jakarta planned to cut bond sales by a third and borrow from the World Bank, the Asian Development Bank, Japan or Australia to fill the budget gap.

"We ask them to be ready and provide standby loans for us, should the bond markets get worst," he was quoted as saying. Waluyanto said Jakarta was seeking up to $5 billion from foreign donors to help replace ageing infrastructure.

Indonesia, Southeast Asia's largest economy, has slashed its 2009 growth forecast from 6.3 percent to 4.5-5 percent next year, as economic conditions deteriorate globally.

Waluyanto said the ADB had agreed to provide up to $1 billion to Jakarta toward a finance facility that would only be used if the country could not secure international market finance.

President Susilo Bambang Yudhoyono pressed Australian Prime Minister Kevin Rudd on the loan issue at a weekend meeting of Asia-Pacific leaders in Peru, Australia's Courier-Mail newspaper said on Wednesday.

A spokesman for Treasurer Wayne Swan told Reuters that "no decision has been taken" on the loan request, which would be part of an international package overseen by the World Bank.

Rudd and Yudhoyono will likely discuss the issue again at a meeting of regional leaders on democracy issues in Bali on December 10.

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