Confusion prevails over debt moratorium from Paris Club
Confusion prevails over debt moratorium from Paris Club
Urip Hudiono, The Jakarta Post, Jakarta
The public debate continues on how Indonesia should respond to
the debt moratorium offer from the Paris Club creditor countries,
as the offer itself is still vague in what it implies.
In its official statement last Thursday, the Paris Club
announced an immediate debt repayment reprieve for countries
devastated by the recent Asian tsunami disaster, to allow them to
prioritize more resources for humanitarian and reconstruction
needs.
The immediate debt moratorium will start until the World Bank
and the International Monetary Fund (IMF) have made a full
assessment of the countries' financial needs, after which each
country can then ask for a further moratorium accordingly.
Debate, however, has continued as the scheme does not specify
how long the assessment would take, which debts would be exempted
during the assessment, and whether the terms and conditions for
the possible moratorium beyond that period would still be seen as
an exceptional case in relation to the disaster.
The government itself has decided to play it safe by
considering the offer first and saying it would prefer grants
over a debt moratorium, which could affect Indonesia's
creditworthiness and put the country under another IMF program.
Several analysts, however, still insist that the government
should seize the moment to push for a debt reduction, as well to
help free the country from its current debt trap.
Economist Sri Adiningsih from the Yogyakarta-based Gadjah Mada
University said the Paris Club's decision to be more specific
about the debt moratorium only after an assessment shows that
they would not give a package that exceeds the amount of damages
suffered by the tsunami-stricken countries.
"It therefore depends on how the government can negotiate the
debt moratorium's terms and conditions," she said.
Commenting on the fact that a moratorium would only mean
shifting the repayment of debts to a later time, Adiningsih
suggested the government should request that the payments be
spread over a span of at least 10 years with a reduction in its
interest, without ruling out the possibility of debt swap
schemes.
Voicing a similar opinion, Bustanul Arifin from the Institute
for the Development of Economics and Finance (Indef) said that a
debt haircut would be more useful for Indonesia.
Bustanul, however, agreed with the government's decision to
carefully consider the debt moratorium offer first before
accepting it.
"The government must of course be prudent and really prepare
their negotiations to get the most out of the debt moratorium
offer," he said.
Economist Rizal Ramli meanwhile questioned the competence of
the IMF in conducting the assessment.
"IMF's expertise is in planning fiscal and monetary policies,
not in assessing damages," the former coordinating minister for
the economy said. "Couldn't we do the assessment?"
As the debates continues, the fact remains that Indonesia is
in dire needs of debt relief -- be it in the form of a writeoff,
haircut or even a moratorium.
A study by the National Development Planning Agency (Bappenas)
shows that, if no relief is provided, it would take at least 10
years for Indonesia's foreign debt to reach a "safe level", which
could be translated into a debt to gross domestic ratio (DTO) of
40 percent, and a debt to service ratio (DSR) of 25 percent.
Indonesia's foreign debt currently stands at US$78.25 billion,
with a DTO of 55 percent and a DSR of 37.5 percent.