Antiterror support not linked with Paris Club

Berni K. Moestafa, The Jakarta Post, Jakarta

Indonesia could count on U.S. support during debt rescheduling talks with the Paris Club according to one senior U.S. official, who also warned that the meeting should not be linked with Indonesia's much criticized role in combating terrorism.

The United States executive director to the International Monetary Fund (IMF), Randy Quarles, said on Wednesday that his government would be supportive during the Paris Club meeting.

"I wouldn't draw a link necessarily between the two (issues)," he said when asked whether Indonesia's allegedly slow antiterrorism efforts would affect U.S. support during next month's Paris Club meeting.

The government is seeking to reschedule some US$5.5 billion in sovereign debt falling due this and next fiscal year to creditor nations grouped in the Paris Club.

Rescheduling the debt is seen as crucial to keeping the state budget deficit at the targeted level of Rp 42.13 trillion (about $4.2 billion) this year.

But concern has surfaced that the government may not get the club's full support when they meet for talks next month.

Indonesia has come under fire for not doing enough to crack down against alleged terrorists at home amid suspicion of an Indonesia-based terrorist network planning to wreck havoc in the region.

"Indonesia is a long-standing friend and ally of the United States, so that would always inform our attitude towards Indonesia in the Paris Club," Quarles said, describing the government's antiterrorism policy as welcome.

Quarles also hailed the House of Representatives' approval of the money-laundering bill last Thursday, which he said would not only serve to further the war against terrorism, but was also vital to improving macroeconomic stability.

The US government and the IMF, he said, believed that efforts to counter money-laundering and terrorist financing were of "significant macroeconomic relevance".

He added that Indonesia's performance in these areas would become part of the IMF's review policy in the future.

But Quarles played down suggestions that the US government was mixing its foreign policy with that of the IMF's.

"It's clearly a desire of secretary O'Neill (U.S. Treasury Secretary Paul O'Neill) not to use the international financial institution for political purposes, and not to attempt to further U.S purely political interests through policies in the international financial institution," he explained.

Policymakers had earlier raised hopes of a favorable debt rescheduling deal should Indonesia prove to the U.S. its commitment to combating terrorism.

The Paris Club allowed Pakistan last year to reschedule two- thirds of its debt over spans of more than 38 years and 23 years under what are called the Islamabad Terms.

Many believe the deal was made possible as Pakistan is one of the U.S.'s most crucial allies in its war against terrorists in Afghanistan.

Quarles did not specify the purpose of his visit to Jakarta, other than to say it was to assess Indonesia's economic situation at first hand.

But his arrival followed just after Minister of Finance Boediono flew to Washington last week to explain more or less the same thing.

Quarles said he had met in Jakarta Boediono, State Minister of State Enterprises Laksamana Sukardi, and Indonesian Bank Restructuring Agency (IBRA) chairman I Putu Gede Ary Suta.

So far, he said, Indonesia appeared to be heading in the right direction in terms of macroeconomic stability and its slow yet ongoing privatization efforts.

Quarles also expected to have an IMF review mission arriving in Jakarta soon to pave the way for the release of another loan tranche.

That would mark the fifth signing of a government Letter of Intent (LoI) to the fund, after last year's deal secured the disbursement of a $360 million loan tranche.