Demand for deb cuts will raise new problems<\/p>\n
Demanding cuts in the repayment of foreign debts will affect
\nIndonesia's reputation, in turn making it more difficult for the
\ncountry to access new credit in the future, says Hadi Soesastro,
\nexecutive director of the Centre for Strategic and International
\nStudies (CSIS).<\/p>\n
Question: Now that Indonesia has signed a new letter of intent
\nwith the International Monetary Fund (IMF), is it possible for
\nthe country to look for an agreement on the reduction of its
\nofficial foreign debt repayments with the Paris Club of donors in
\ntheir meeting next month?<\/p>\n
Answer: No. It would be impossible for the country to look for
\na reduction in the repayment of either its debt principal or debt
\ninterest because the Paris Club has no framework for the
\nreduction of debt repayments. If Indonesia wants to have its debt
\nrepayments reduced, a new forum of negotiation would be needed.
\nBut such a forum is usually designated just for the least
\ndeveloped countries.<\/p>\n
Q: What would be the impact if Indonesia asked its creditors to
\nreduce part of its debt obligations?<\/p>\n
A: Once Indonesia looked for the reduction of debt repayments,
\nits reputation would go down and, for a certain period of time,
\nit would never be able to find new credit sources because no
\nforeign creditors would be willing to lend it any money.<\/p>\n
Q: Are there any other handicaps limiting Indonesia's chances of
\na debt reduction?<\/p>\n
A: A creditor country like Japan (Indonesia's largest creditor)
\nhas no regulation that allows its government to waive foreign
\nloans.<\/p>\n
Q: But some non-governmental organizations (NGOs) have urged the
\ngovernment to ask for the waiving of part of its debts so that
\nmore money can be allocated to poverty alleviation. Your comment?<\/p>\n
A: Some NGOs, not only domestic but also international ones, have
\nalways been demanding for the waiving of some foreign debt. But
\nthe fact that their demands have never been adopted indicates
\nthat the logic they use cannot be implemented in the world
\neconomy. Their logic could probably be implemented only in a
\ncompletely different world of economics. Otherwise, we would have
\nto be prepared to be regarded as one of the least developed
\ncountries. We should not do that if we want to be regarded as a
\nrespectable country. Once we owe money, we must be willing to
\nfulfill the consequential obligations.<\/p>\n
I do agree that debt repayment should not be burdened by the
\npoor and, therefore, we must be able to restructure our own
\ndomestic economy. With the spirit of helping the poor, for
\nexample, the government should not import luxury cars just to
\nserve VIP guests attending international conferences hosted by
\nIndonesia.<\/p>\n
So the NGOs are not realistic with their ideas and they are
\nnot familiar with the world they live in.<\/p>\n
Q: Can Indonesian NGOs make effective appeals to international
\ncreditors if they cooperate with their international
\ncounterparts?<\/p>\n
A: They can establish cooperation but their appeals will never be
\neffective because creditors will say that the money that they
\nhave lent to Indonesia belongs to the societies to whom they must
\nbe accountable to.<\/p>\n
Indonesian NGOs concerned with the fate of the poor will
\ncontinue arguing for a reduction of foreign debt repayments
\nbecause raising such an issue has become part of their agenda of
\nactivities. But their suggestions cannot be implemented because
\nthey are unrealistic and unacceptable.<\/p>\n
Q: Then what is necessary for Indonesia to reduce its debt
\nburden?<\/p>\n
A: What's necessary is to look for the rescheduling of its debt
\nrepayments to ease the government's budget strain. Indonesia and
\nParis Club members have been involved in negotiations for the
\nrescheduling of a certain amount of debts for a certain period of
\ntime.<\/p>\n
It would be better for the government to look for the
\narrangement of Paris Club meetings not only for next month but
\nalso for the coming few years because the government's budget
\nburdens will continue to be very heavy in the coming five years.<\/p>\n
Q: How about looking for greater amounts of grants from
\ncreditors?<\/p>\n
A: That will be good because grants will help the government
\nfinance its spending without having to seek new loans. To obtain
\ngreater amounts of grants, the government will have to intensify
\nbilateral negotiations with individual creditors. Grants will
\nalso help reduce Indonesia's pressure in its balance of payments.<\/p>\n
The government must gradually reduce new foreign debt in the
\ncoming years. (Rikza Abdullah)<\/p>",
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