Govt continues to study moratorium conditions, details

Govt continues to study moratorium conditions, details

Rendi A. Witular, The Jakarta Post, Jakarta

The government is still studying conditions and details of the
latest debt moratorium offer from the Paris Club of creditor
nations, before making its final decision on the offer.

"There is a need for further negotiation before we accept the
offer. Officially, we have yet to decide our position," Vice
President Jusuf Kalla told a press briefing on Thursday.

He added that the moratorium offer would help the government
keep this year's budget deficit to below 1 percent of gross
domestic product (GDP).

Indonesia is facing the likelihood of a budget deficit of
about 1.3 percent of GDP this year, due mainly to the need to
finance reconstruction of tsunami-devastated Nanggroe Aceh
Darussalam and parts of North Sumatra.

Kalla said that if the government accepts the moratorium on
beneficial terms and conditions, then the country would be able
to allocate sufficient funds for Aceh reconstruction as there
would be additional funds in the state budget.

"The moratorium is being given to ease the burden on our state
budget for rebuilding Aceh. These additional funds -- resulting
from the moratorium -- should be used in accordance with that
purpose," he said.

The government said it would allocate some Rp 45 trillion
(US$4.82 billion) for the reconstruction of Aceh over the next
five years, with some 50 percent of funds going to infrastructure
projects, 20 percent to health and education programs, and the
remaining 30 percent for other purposes.

Following the three-month debt suspension worth US$350 million
in the immediate wake of the tsunami, the Paris Club last week
agreed to extend the moratorium until Dec. 31 -- worth $2.6
billion -- to help Indonesia rebuild Aceh. In total, Indonesia
owes Paris Club nations about $48 billion.

The moratorium offer includes the suspension of payments of
debt principal and interest for a certain period of time.

Earlier on Monday, State Minister of National Development
Planning Sri Mulyani Indrawati said that the government would
likely take up the offer as it would not be compelled to enter
another program with the International Monetary Fund (IMF), or to
apply "comparable treatment" towards private sector debts.

Indonesia has objected to linking the debt moratorium with
having to undergo another program with the IMF, due in part to
public opposition, with many believing that the IMF's previous
economic recipes had failed to nurture the nation's economy and
had in fact slowed its recovery. Indonesia's financial
institutions virtually collapsed during the Asian financial
crisis of the late 1990s.

Indonesia also rejected the so-called "comparable treatment"
scheme, which would have meant that creditors would have had to
suspend private sector debt repayments as well, which would have
resulted in a downgrade of their credit portfolio's and caused a
downgrade in Indonesia's overall credit rating, which actually
improved last year.

To obtain the budgetary benefits from the debt moratorium,
however, the government must first negotiate with several Paris
Club members who are still reluctant to suspend the payment of
their debts, or who have not yet set out any terms for the
moratorium.