BI wins debt rollover from London Club
BI wins debt rollover from London Club
JAKARTA (JP): Bank Indonesia won approval from the London Club
of commercial creditors on Thursday to roll over some US$340
million in sovereign debts.
Bank Indonesia director for foreign affairs Nana Supriana said
in a press statement that the foreign creditors agreed to extend
the repayment date for the debt principal to 12.5 years, with a
grace period of three years.
Nana said that the rolled-over debt consisted of $140 million
in standby loans obtained in 1994 and a similar $200 million loan
obtained in 1995.
The government took the standby loan to safeguard the
country's balance of payments. The standby loan was originally
due between April 2000 and March 2002.
The central bank, acting on behalf of the government, started
debt restructuring negotiations with the London Club in May.
The London Club is an informal body that brings together
commercial banks to discuss the rescheduling mechanism for
distressed debts.
The signing of the agreement followed an approval by the
steering committee of the foreign creditors in June on the Bank
Indonesia proposal to roll over the $340 million in sovereign
debt to 12.5 years.
The steering committee consists of the five largest creditors,
including Bank of Tokyo Mitsubishi Ltd., Industrial Bank of Japan
Ltd., Banque Nationale de Paris, Chase Manhattan Bank, and
Commerzbank AG.
The agreement reached with the London Club was based on a
similar agreement reached by the government in April with the
Paris Club of creditor nations to reschedule some $5.8 billion in
sovereign debts. The repayment dates, due between April 2000 and
March 2002, were rescheduled from 11 to 20 years.
The signing of the debt restructuring deal with the London
Club is seen as a positive factor, strengthening the country's
balance of payment position and eliminating a previous concern of
possible sovereign debt default.
The rupiah strengthened to Rp 8,775 per U.S. dollar from Rp
8,835 late on Wednesday following news of the debt restructuring
deal, but the local currency fell back to Rp 8,840 late on
Thursday due to domestic political concerns.
Another failure to bring former president Soeharto to court
for alleged corruption raised concern that students would return
to the streets in massive protests.
Rating
Meanwhile, ratings agency Standard & Poor's said Thursday it
would upgrade Indonesia's sovereign rating "very soon" after the
debt restructuring agreement with the London Club.
"Completion of this means there is no more sovereign debt to
restructure," Takahiro Ogawa, S&P's director for sovereign
ratings in Asia-Pacific, was quoted by Dow Jones newswire as
saying.
S&P will upgrade Indonesia's sovereign rating in the range
triple C to single B from the current selective default grade.
But the ratings agency wants to see official documentation of the
London Club agreement before upping the rating, Ogawa said.
The debt restructuring agreement is also seen helping ease
pressure on the state budget, heavily burdened by the country's
bank restructuring and recapitalization programs.
The government is also scheduled to meet with its traditional
donors grouped in the so-called Consultative Group on Indonesia
(CGI) in Tokyo from Oct. 17-18 to seek some $4.8 billion in loans
to help plug next year's state budget deficit.
Separately, World Bank Chairman James Wolfensohn reiterated
the bank's commitment to continue its support for Indonesia.
Wolfensohn said in a press statement issued Thursday after a
meeting with Coordinating Minister for Economics Affairs Rizal
Ramli that the CGI meeting in Tokyo would go ahead as scheduled.
The World Bank is the coordinator of the CGI.
The cooperation of the international banking sector came as a
relief since the international community had strongly criticized
the government over the recent killing of three United Nations
humanitarian workers in Atambua, East Nusa Tenggara by pro-
Jakarta East Timorese militias. (rei)