First round of Indonesian debt talks end in Tokyo

First round of Indonesian debt talks end in Tokyo

TOKYO (Reuters): A steering committee representing Indonesia's
creditor banks held talks in Tokyo yesterday with government
representatives from Jakarta, banking sources said.

They said the group plans to release a joint statement on
today or tomorrow.

"The committee may release a joint statement after the meeting
on Saturday (today)," a banking source said, adding that if the
talks go on into tomorrow, the statement may be released then.

The source declined to comment on the details or the progress
of the talks, which are the second round of discussions on the
settlement of Indonesia's private external debt, which stood at
US$80.2 billion at the end of January.

Analysts said the most contentious issue to be discussed at
the meetings could be the length of a possible postponement of
Indonesian debt repayments.

Bankers and the Indonesian officials are also expected to
discuss ways to smooth trade financing for Indonesian companies
and to ensure credit lines from foreign financial institutions.

Riots that erupted in the north Sumatra capital of Medan and
several other cities after the government cut subsidies for fuel
oil and electricity have rocked Asian markets and triggered a
slide in the rupiah.

The cut in subsidies was in line with the demands made by
International Monetary Fund as a condition for its disbursement
to Indonesia of a $1 billion loan tranche.

Yesterday, Indonesia's head debt negotiator Radius Prawiro met
the steering committee of Indonesia's creditor banks, co-chaired
by Bank of Tokyo-Mitsubishi (BTM), Chase Manhattan Bank and
Deutsche Bank AG.

Indonesia's Coordinating Minister for Economy, Finance and
Industry Ginandjar Kartasasmita will arrive in Tokyo on Saturday
and is expected to take part in the talks, which were scheduled
to resume at 9 a.m. (0000 GMT).

In mid-April, the bank committee and the Indonesian government
agreed to provide a framework for bilateral negotiations in order
to settle Indonesia's private external debt.

The framework, originally put forward by BTM, involves a fund
of $10 billion to $15 billion which would sell Indonesian
companies dollars at a fixed rate of 5,000 rupiah.

The joint statement issued at the time said the framework was
inspired by the program that allowed Mexico to resolve its
corporate debt crisis of the early 1980s.

The statement also said the framework was intended to provide
private-sector debtors with protection from foreign exchange rate
risks.

Japanese bankers said, however, that the creditors and Jakarta
have yet to agree on how to finance the framework and on who
would assume the foreign exchange losses that could arise if
social unrest continued in Indonesia.