Sat, 12 Mar 2005

From: AFP

Paris Club to suspend debt repayment for RI and Sri Lanka

Agencies, Paris/Canberra/Jakarta

Indonesia and Sri Lanka, devastated by the tsunami disaster on Dec. 26, have been given a moratorium until Dec. 31 on repayment of their debt owed to Paris Club members, the Paris Club said on Thursday.

Debt repayments will be rescheduled over five years, the so- called Paris Club of creditor nations said in Paris.

The decision was made on Wednesday after the Club received an assessment from the International Monetary Fund and the World Bank on the needs of Indonesia and Sri Lanka in the wake of the tsunami, the Club said in a statement.

The Club recalled its announcement after a Jan. 12 meeting that, in view of the effects of the tsunami and "to allow those countries affected to dedicate all resources to address humanitarian and reconstruction needs," it did not expect any debt payment from tsunami-affected countries until the IMF and the World Bank had made a full assessment of needs.

"On the basis of the analysis of the situation made by the IMF and the World Bank, and for debtor countries that have declared their interest, Paris Club Creditors, consistent with the national laws of the creditor countries, have agreed not to expect any debt payment on eligible sovereign claims from those countries until Dec. 31, 2005," the statement said as quoted by AFP.

"They offer that the deferred amounts be repaid over five years of which one year of grace," it said.

Indonesia and Sri Lanka, the only two tsunami-struck countries that have shown an interest in the Paris Club proposal, will resume repayment of the debt to Paris Club creditors in early 2006, with the payment due for 2005 to be paid over four years, from 2007.

"Paris Club creditors expect that the resources freed by this measure will benefit directly the people affected by the tsunami," the Club said.

A Paris Club official said the initial amounts owed by the two countries was a combined US$3.8 billion. He did not provide specific figures for each country.

Indonesia owes about $48 billion to Paris Club out of a total of around $272 billion worth of external debt held by tsunami- affected countries.

"I think we are going to look at it again, but from a cash flow point of view it would be very hard on us. It would only increase our burden," Mulia Nasution, Indonesia's Ministry of Finance Director General for State Treasury, told Reuters in Jakarta on Friday. "It would not do much help for us."

State Minister of National Development Planning Sri Mulyani Indrawati said on Thursday rebuilding the country's tsunami-hit area would cost up to Rp 10 trillion ($1.1 billion) in 2005 and Rp 45 trillion over the next five years.

Australia, which sent around 1,000 military personnel to Indonesia as part of the aid effort, agreed to join other Paris Club creditors in the moratorium offer.

"Australia is pleased that the debt moratorium will be in addition to the direct assistance already committed by Paris Club members," Foreign Minister Alexander Downer and Trade Minister Mark Vaile said in a statement in Canberra on Friday.