Calls for debt write-off mount as Paris Club starts
The Jakarta Post, Jakarta
As debates on whether the government should pursue a debt reduction from foreign lenders intensified here, Coordinating Minister for the Economy Dorodjatun Kuntjoro-Jakti and Finance Minister Boediono met on Thursday for a two-day debt rescheduling conference with the Paris Club of creditor nations.
The government is seeking to reschedule US$5.5 billion in foreign debt which is set to mature over the next 17 months beginning this month. The rescheduling facility is seen as crucial to help ease the burden on the state budget.
This is the third time the government has sought to reschedule their loans from the Paris Club since the country was hit by the 1997 economic and financial crisis.
But non-governmental organizations (NGOs) said that the usual debt rescheduling facility offered by the Paris Club would not solve the country's huge debt estimated to be $131 billion, of which $71 billion is owed to foreign lenders.
"I can't understand why the government has gone to Paris with such a minimal proposal," Sugeng Bahagijo of the International NGO Forum on Indonesian Development (INFID) said on the sidelines of a seminar on debt.
He said that the government should instead seek a debt write- off to help the country lift itself out of the prolonged crisis.
Other NGO activists argued that a huge portion of the foreign debt had long since been misused and squandered by corrupt officials in previous administrations.
"Indonesia must be brave, and vow not to pay debts incurred by the previous regime, especially the New Order (Soeharto) government," economist Revrisond Baswir from Gadjah Mada University told participants at the seminar.
The participants argued that a debt write-off would be fair because the Soeharto administration used the foreign loans to oppress people and totally defeated the main aim of the loans, which was to raise the welfare of people.
Revrisond said that Indonesia, especially the current Megawati government, should be given the right not to pay the New Order debts.
"We cut our links with the corrupt regime in 1998, and the new generation should not have to inherit those debts, since the debts brought suffering to people," he said, adding that around 40 million Indonesians had fallen below the poverty line, an amount higher than the entire populations of some nations in the Highly Indebted Poor Countries (HIPC), which are eligible for debt cuts.
But others opposed such extreme measures, saying it would only create more damage to the country's economy as investors would shun Indonesia.
Not to mention, it would add pressure to the local currency as well as raising the cost of lending for the corporate sector.
Even Vice President Hamzah Haz expressed disagreement over a debt cut, saying it only applied to a country that is so poor that it had no means to repay its debts.
"The way I see it, a (write-off) is impossible," Hamzah said after a Cabinet meeting.
Revrisond acknowledged that such a controversial request might meet strong challenges from the creditors, and added a nationalist tone to the debate.
"They might boycott us, but we must show a sense of nationalism, that we are not easily colonized by other nations," he claimed.