Critics belittle Paris Club deal

The Jakarta Post, Jakarta

Critics believe the US$5.4 billion debt rescheduling deal obtained by the government last week from the Paris Club of creditor nations will be of little benefit to the country, whose stock of debts is still unbearable.

"It (the Paris Club deal) is a disaster (for Indonesia)," said University of Gajah Mada economist Revrisond Baswir.

He said extending debt repayments to between 18 and 20 years would only succeed in passing the huge debt burden onto the next generation. This includes debts that resulted from the misuse and squandering of loans by the former authoritarian leader Soeharto and his cronies.

According to one estimate, around 30 percent of past foreign loans were embezzled.

"We do not have to pay these debts (from corrupted loans); there must be a write-off," he said.

Revrisond also said deals with the Paris Club normally came with conditions attached, including trade liberalization, privatization and other economic policies that could prove disadvantageous for ordinary Indonesians.

As an example, he said that opening up the country's agricultural sector would cause serious problems for local farmers, while privatization would result in layoffs.

He added that the debt rescheduling deal would put Indonesia under the watchful eyes of the International Monetary Fund and other lenders for a very long time.

Indonesia's public debt reaches a staggering $131 billion, or the equivalent of last year's gross domestic product. Some $71 billion is owed to foreign lenders.

Soegeng Bahagio, of the International NGO Forum on Indonesian Development, said the debt rescheduling deal would only provide temporary relief for the government's "cash flow" problem.

He said that without a fundamental solution to the country's huge debt burden, the state budget would continue to suffer serious "bleeding".

He urged the government to pursue a debt write-off or the country would eventually suffer the kind of debt problems now being experienced by Argentina.

He said that based on the 2000 state budget, each Indonesian must pay approximately $45 per year to foreign creditors, while they only receive $2 per year in terms of government health and education programs.