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Wed, 15 Jan 2003

JP/Govt focuses on bilateral talks to settle foreign debts

Govt focuses on bilateral talks to settle foreign debts

Dadan Wijaksana, The Jakarta Post, Jakarta

The government will have to rely on bilateral talks with individual creditor nations to reschedule the country's huge foreign debts after it graduates from the International Monetary Fund (IMF) at the end of the year.

"With the absence of the IMF economic program, we can no longer ask for debt relief through the Paris Club or the London Club.

"I think diplomacy has to be exercised. Indonesia has never missed any payments since 1950 and I intend to keep it that way in dealing with our debts," Coordinating Minister for the Economy Dorodjatun Kuntjoro-Jakti said on Tuesday as reported by Antara.

Under the auspices of the IMF, the government has successfully asked for debt rescheduling facilities from foreign creditors, both governments and private lenders. While the Paris Club groups foreign creditor nations, the London Club groups foreign private lenders.

The talks with the Paris Club and the London Club are seen as a crucial part of efforts by the government to keep the country's huge foreign debts, standing at more than US$70 billion, at a more manageable level.

With its massive pressure on the country's fiscal balance, debt rescheduling schemes are a decisive way to lead the country out of the debt trap.

However, with Indonesia expected to end a four-year long loan program with the IMF, the Paris Club or London Club facilities will no longer be possible as foreign countries and international financial institutions always make their assessments on the country's economy based on the IMF's evaluations.

Indonesia's debts to the IMF total US$13 billion, with only about $3 billion repaid. There is still about $2 billion of the IMF's loan commitment that has yet to be disbursed.

Elsewhere, Dorodjatun said that the government was drawing up an exit strategy from the IMF program. A team has been tasked to formulate economic policies that are expected to replace various economic reform programs that the government has carried out with the fund.