Govt plans to reschedule $300m in commercial debts
Govt plans to reschedule $300m in commercial debts
JAKARTA (JP): Indonesia plans to negotiate soon with foreign
commercial banks on a mechanism to reschedule some US$300 million
in government debts due in 2000 and 2001, according to Bank
Indonesia director Burhanudin Abdullah.
Burhanudin said on Sunday that the commercial debt deal would
be on comparable terms to that reached with the Paris Club of
creditor nations last week.
"The deal will be based on a comparability treatment," he told
The Jakarta Post by phone.
He said it was custom to maintain the principle that all
creditors be treated equally.
Burhanudin said that $70 million was due to be repaid this
year, and the remainder next year.
He added that the debt was part of standby loans signed by the
government with commercial banks in 1994 and 1995 to safeguard
the country's balance of payments.
Burhanudin could not say when the talks would start except
that they usually take place after the Paris Club agreement, and
a deal was expected to be completed in two to three months
depending on the agenda.
He said the commercial debt talks would be made under the
framework of the "quasi" London Club, which last year took place
in Singapore.
The London Club is an informal body that brings together
commercial banks to discuss the rescheduling mechanism for
distressed debt. It normally meets once the Paris Club has
reached an agreement.
Burhanudin said that most of the government's foreign bank
creditors were from Japan.
The government and the Paris Club of 19 sovereign creditors
reached an agreement last Thursday whereby some $5.8 billion in
debts will be rescheduled to between 11 and 20 years.
The Paris Club said $2.1 billion of rescheduled debts was due
this year and the remainder in 2001 and 2002.
"The Paris Club agreement will provide some relief to the
state budget and balance of payments to allow the government to
focus on accelerating economic recovery," Burhanudin said.
He explained that the debt rescheduling agreement would allow
the country's resources and foreign exchange reserves to be used
for other "productive" purposes to accelerate economic recovery.
Indonesia has been badly hit by the economic crisis that
started in the middle of 1997. There have been signs recently
that the economy is starting to recover.
Bank Indonesia expects gross domestic product to grow by
between 3 percent to 4 percent this year, compared to a
relatively flat growth in 1999 and economic contraction of more
than 13 percent in 1998.
Many experts have said that the Paris Club agreement should
provide momentum for the government to accelerate economic
recovery because the deal should help revive confidence in the
economy.
The International Monetary Fund expressed similar confidence
late last week and said it was hopeful about disbursing its $400
million in loans to the country later next month.
The fund was scheduled to disburse the loans early this month,
but delayed disbursement because the government failed to meet
the end-March schedule to complete various economic reform
measures.
The government completed most of the crucial reforms on April
8 ahead of the Paris Club meeting, which seems to have pleased
the fund. (rei)