Govt proposes to reschedule sovereign debt
JAKARTA (JP): The government plans to reschedule part of its foreign debt to help raise funds to cover its immediate economic and fiscal needs, according to Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita.
Speaking to journalists after a two-hour meeting yesterday with President B.J. Habibie, Ginandjar said the government would only reschedule the principal and would continue to pay the interest.
Ginandjar said the government had to adopt such a restructuring plan because the country was facing such severe economic turmoil.
"It is not proper that during these hard economic conditions we force ourselves to repay, to settle our debt," Ginandjar said.
With the rescheduling of debt repayments, funds that would have been used to repay loans could be redirected to other purposes, he said.
Ginandjar called on the public not to worry about the government's foreign debt restructuring plan as countries in Latin America had pursued similar strategies to survive crises in the 1980s and early 1990s.
He also assured foreign creditors that Indonesia would remain committed to its debt obligations despite the partial rescheduling plan.
"Technically we will not be making a default. Therefore we do not need to use the Paris Club procedure because we are not rescheduling the interest but just the principal."
Nevertheless, he said, the proposal would be discussed with donors and the government hoped to reach a final agreement with them at the Consultative Group on Indonesia (CGI) meeting in Paris on July 29 and July 30.
Ginandjar noted the government would not negotiate with multilateral organizations such as the World Bank and the Asian Development Bank because they have strict rules which do not allow them to renegotiate any kind of rescheduling.
Therefore, the government will only ask donor countries to help with their bilateral loans to Indonesia.
However, Ginandjar indicated that Indonesia's largest creditor country, Japan, was reluctant to agree to the proposal.
Fresh money
"Japan has its own approach. Japan prefers to give fresh money and we repay our debt principal and the interest," Ginandjar said.
Asked about the rescheduling timetable, Ginandjar said it had yet to be decided, adding that the country had already paid its debt obligations for April/June 1998.
"Now we are calculating how much we owe for July 1998/March 1999," Ginandjar said, but he declined to give further details of the amount to be rescheduled or the identities of the creditor countries.
"Within one or two days I will announce the details of the (proposal) components," the minister promised.
"We will continue this postponement until we are able to overcome the crisis," he added.
The government's official debt totals US$54.4 billion, while corporate debt is about $80 billion. The private sector reached a temporary moratorium with its creditors recently.
In the 1998/1999 revised budget, the government allocated Rp 46.51 trillion ($4.39 billion on an assumption of Rp 10,600 per dollar) for repayment of overseas debt principal during the fiscal year and Rp 31.03 trillion for interest. (prb)