Economists urge govt to seek debt waiver

JAKARTA (JP): Economists have called on the government to reschedule repayment of its foreign debts or declare a debt moratorium to help speed up the country's economic recovery.

Sri Edi Swasono and Didik Rachbini said yesterday that the repayment of accumulated foreign debts was a heavy burden for an economy saddled by a monetary crisis.

"It is a fact that we are trapped in debts," Sri Edi told a room full of students at Mercu Buana University in West Jakarta.

"Without rescheduling, we will only end up borrowing more money to cover our debts, creating more uncertainty for the future."

He added that the debt burden was beyond normalcy.

The government announced in February that the nation's foreign debt as of the end of last year was US$136.09 billion, consisting of $67.77 billion owed by the public sector, and $68.31 billion by the private sector.

Government annual overseas debt services accounted for some 25 percent of the total state budget. The government allocated Rp 37.8 trillion to service foreign debts in the current fiscal year, under an assumption of Rp 5,000 per U.S. dollar.

"If we do not have to repay our debts and interest for five years, we would have enough money to run the engine of the domestic economy," Sri Edi said.

"In five years, we would have enough money to begin repaying the debts."

Didik said debt rescheduling would enable the government to use the funds normally allocated for debt repayment to finance its development spending and therefore stimulate growth.

Essential in this effort, he added, would be savvy economic diplomacy to negotiate with foreign debtors.

"There must be a strong team, consisting of people responsible for the debts or those who made the loan deals such as (the President's economic advisor) Widjodjo Nitisastro."

Didik, an assistant to the president of Mercu Buana University, said the country's diplomacy was weak as technocrats, officials and ambassadors lacked the initiative to relieve the country of its burden, and merely depended on the central to find answes.

"Depending on our negotiations, we could perhaps get the creditors to issue write-offs of some of our debts, like they did for the Latin American countries."

Sri Edi said Indonesia would obtain the same privilege of freezing its debts repayment if it could prove to the International Monetary Fund that it was complying with the terms of their joint agreement.

The government announced a supplementary economic reform agreement last week, in addition to the two other reforms agreed upon last January and October, to obtain the IMF's second tranche of bailout money amounting to US$3 billion.

"The government had completed one stage of our struggle to stabilize the economy with the IMF. This is fine for a while, but we must negotiate our debts as soon as possible after the government proved that it could still manage the economy," he said.

"(The reason) why we haven't asked for rescheduling in dealing with the IMF so far is mere arrogance -- 'poor but conceited'," he said. (das)