Govt starts debt payment deferrals: Minister

JAKARTA (JP): Indonesia began deferring payments of its sovereign debt this month in line with agreements made with the country's major international lenders, a senior minister said yesterday.

Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita added that Indonesia may defer more sovereign debt payments for the 1999/2000 fiscal year if the economic situation demanded it.

He said reports that the country had missed sovereign debt payments for August were inaccurate, noting that the country had simply begun to implement an agreement reached with the International Monetary Fund (IMF) and the Paris Club of creditor nations.

"This is not a default," Ginandjar told journalists before a Cabinet meeting at the Bina Graha presidential office. "What we did has already been told to the donor countries."

He stressed that the government would only defer payment of its debt principal but would continue to pay the interest.

The head of the Ministry of Finance's legal and public relations bureau, Hadiyanto, noted in a statement that the sovereign debt rescheduling would apply to bilateral debts.

The rescheduling of the government's bilateral debts began Aug. 6, Hadiyanto said.

"Debts other than bilateral ones, like bonds and commercial loans, will still be serviced," he said.

Ginandjar said the sovereign debt rescheduled this fiscal year would total US$1.25 billion, as agreed with the IMF and the Paris Club.

"We will discuss the issue again for the next fiscal year," he said. "If we still need to, we'll repropose it next year."

The $1.25 billion is part of an additional $6.2 billion in new financial aid to Indonesia arranged by the IMF. The funds were committed by, among others, international lenders which agreed to reschedule debt payments.

The government previously said that countries which had agreed to reschedule debt payments included the U.K., the U.S., France and Germany.

Japan and other bilateral lenders and international financial institutions chose to give Indonesia fresh loans to repay its debts to them.

Ginandjar said Japan had committed $1 billion to Indonesia for debt servicing.

Details on the sovereign debt rescheduling are to be fleshed out at a meeting of Paris Club members in the French capital on Sept. 22 and Sept. 23, at which Indonesia will be represented by Minister of Finance Bambang Subianto.

Ginandjar said the current debt rescheduling, however, would not be extended for 30 years -- as was the case in the early 1970s when the country was recovering from the economic turmoil of the previous decade.

"Maybe it will not be for that long, only for the current period of hardship or during the time when we want to safeguard our balance of payments.

"If our economy is recovering and our exports are back to normal, we can fulfill the repayments. We're going to discuss those problems with the Paris Club."

Ginandjar said the timing would be governed by several factors, including the successful implementation of the Frankfurt agreement between Indonesian private debtors and international banks to reschedule the country's massive private sector debt.

"We will also look at the Russian method," Ginandjar said. (prb/rid)