After paying off debts to the International Monetary Fund (IMF) four years ahead of schedule, the Indonesian government this week made a bold move to end ties with the country's largest group of creditors.

The Consultative Group on Indonesia (CGI), which comprises 32 multilateral and bilateral creditors, has been lending the country since 1992.

Looking back further, the CGI was actually the new name of the Inter-Governmental Group on Indonesia (IGGI), established in 1967 by the Netherlands, to coordinate multilateral aid.

"Indonesia no longer needs the CGI," President Susilo Bambang Yudhoyono told journalists at the State Palace Wednesday.

This decision and the IMF debt repayment merely reflect government's resolve to gain full independency in decision-making process and ease refinancing and servicing burdens in the state budget.

"There will be no (consultation) forum with the CGI like the past, when Indonesia submitted its development programs to be discussed, criticized and commented. From now on, we are capable of handling everything without CGI involvement," said the president.

His remarks came just two hours after he hosted a meeting with IMF chief Rodrigo de Rato.

Indonesia last year repaid the remaining debts of 7.8 billion U. S. dollars to IMF, a key CGI member, giving Susilo a stronger position when having talks with Rato.

The previous meeting between an IMF chief and an Indonesian president happened nine years ago when Soeharto signed agreement on a massive bailout program worth 43 billion dollars to save the country from the biter financial crisis, witnessed by IMF executive director Michel Camdessus.

Since then, Indonesia has regularly signed the so-called letter of intents, a what-to-do list Indonesia must fulfill to ensure continued loans.

Some of the IMF directives, including privatization and fuel price rises, apparently had fanned conflicts between the government and the Indonesian people.

Finance Minister Sri Mulyani Indrawati said Tuesday IMF's role was no longer relevant to the current situation in Indonesia.

In case of the recurrence of regional financial crisis, Indonesia could swap foreign exchanges with major economies like Japan and China under the Chiangmai Initiative, instead of taking on new debts from IMF, she said.

The government also came under pressures to terminate loans from CGI, to which Indonesia should consult on annual basis. The CGI last year pledged a new loan of 3.7 billion dollars, plus 1.7 billion dollars in grant.

Debt loads have consumed 30 percent of revenues from taxpayers and prevented the government from allocating bigger budget for public needs.

Indonesia's overseas debts totaled 132 billion dollars in early 2006, or about 40 percent of the gross domestic product, barely changed from 133 billion a year earlier.

Apart from the IMF debts, the government last year also paid 5. 99 billion dollars on debt principal and 2.88 billion on interest.

"Debt loads have weakened the state budget capacity to stimulating economic growth and creating jobs. We hope the president's resolve to end debt taking from the CGI will open a new era of independent policy-making and development financing," leading economic daily Bisnis Indonesia said in Thursday's editorial.

Among CGI members are Indonesia's three largest creditors -- Japan, the Asian Development Bank and the World Bank.

Noted analyst Iman Sugema said small-scale creditors in CGI, like the United States and the Netherlands, had decisive voice in the group and often influenced major creditors with political issues, whereas Indonesia's bargaining position was very weak when faced off them altogether.

"We could negotiate (with creditors) head-to-head. Why should we face them in group?" he was quoted by the national Antara news agency as saying.

Source: Xinhua