Govt says no plan for debt rescheduling, haircut

Rendi A. Witular, The Jakarta Post, Jakarta

Key economic ministers asserted that there was no plan to seek rescheduling on the payment of government debts and interest from overseas creditors, since the country was not in a desperate position to warrant seeking such a facility.

Minister of Finance Sri Mulyani Indrawati said on Thursday that the government would still comply with the 2006 state budget, in which there was no room for any delay in paying debts and interest or seek for a debt discount from creditors.

"We are still working based on the state budget assumptions next year, which have been approved by both the government and the legislators. Therefore, a debt rescheduling policy is unlikely," she said.

She responded to a statement by her successor State Minister for National Development Planning Paskah Suzetta, saying that the government was studying a plan for delaying the payment of debts and interest as well as seeking a debt haircut.

Paskah said the plan would help the country allocate more resources for financing several infrastructure projects and provide incentives for the business community in order to drive higher economic growth.

Coordinating Minister for the Economy Boediono agreed with Mulyani's suggestion over the debt rescheduling.

"The plan to delay debt payment is a merely one person's opinion, not the official stance of the Cabinet, which is needed to approve such a move," he said, without directly intending to refer to Paskah's plan.

Indonesia, Southeast Asia largest economy, has around US$133 billion in domestic and overseas debts.

Creditors grouped under the Paris Club granted in March a debt and interest payment suspension worth more than $3 billion for a certain period of time.

The decision was taken following the instability of the country's state budget due to the devastating tsunami on Dec. 26, 2004 that killed more than 200,000 people in Aceh and part of North Sumatra.

In the 2006 state budget, the government will spend around Rp 91.6 trillion ($9.25 billion) for servicing debts and interest based on the assumption that the rupiah remains at Rp 9,900 against the U.S. dollar, inflation at 8 percent and the three- month Bank Indonesia SBI interest rate at 9.5 percent.

A request for rescheduling is also unlikely since Indonesia is not under the International Monetary Fund (IMF)'s program for economic recovery.

Indonesia graduated from the IMF program in 2004 after receiving guidance from the agency since the financial crisis in 1998.