$340m of govt debts to be rescheduled

JAKARTA (JP): The steering committee at the London Club of commercial banks has approved the Indonesian government's proposal to reschedule around US$340 million of debt falling due through March 31, 2002, Bank Indonesia deputy governor Dono Iskandar Djojosubroto said on Tuesday.

Dono said in a statement that under the terms of the proposal, the extended principal maturities would be repaid over a period of 12-and-a-half years from their originally scheduled payment dates.

"In order to make the proposed rescheduling effective, the consent of all of the lenders under the two loan agreements will be required," said Dono, who represented the government in the negotiations with the club's five-member steering committee.

"The extension of the maturities of Indonesia's external debt builds on the success of our Paris Club rescheduling, and will provide critical support to Indonesia's far-reaching efforts to restructure the country's external indebtedness while strengthening Indonesia's balance of payments position," he added.

The government and the Paris Club of 19 sovereign creditors agreed in April that some $5.8 billion of debts would be rescheduled to between 11 and 20 years.

Some $2.1 billion of the rescheduled debts were supposed to fall due this year, and the remaining in 2001 and 2002.

The London Club is an informal body that brings together commercial banks to discuss the rescheduling mechanism for distressed debt. It normally meets once the Paris Club has reached an agreement.

Bank Indonesia officials have said that the rescheduling deal with the London Club was based on a comparative study of the Paris Club deal, because it was a custom that all creditors be treated equally.

A source at Bank Indonesia said that the $340 million debt was a part of the standby loans signed by the government in 1994 and 1995 with overseas commercial banks to safeguard the country's balance of payments.

The source said that around $70 million of the debts were due to be repaid this year, and the remainder in 2001 and 2002.

Dono said that the five-member steering committee of the London Club considered the proposed rescheduling a constructive basis for the resolution of Indonesia's external commercial debt difficulties.

He said that the steering committee included the Bank of Tokyo-Mitsubishi Ltd., BNP Paribas, the Chase Manhattan Bank, Commerzbank AG and the Industrial Bank of Japan Ltd.

The Bank Indonesia source said that most of the government's commercial debts were owed to Japanese creditors.

The government was forced to seek debt rescheduling alternatives after the country plunged to its worst economic crisis in three decades.

The debt rescheduling would greatly ease the pressure on the state budget, which is already overburdened by the huge cost of financing the bank recapitalization program and providing subsidies for the poor. (rei)