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.