Govt to accept debt moratorium offer: Minister

Urip Hudiono, The Jakarta Post, Jakarta

The government is likely to take up the latest debt moratorium offer from the Paris Club of creditor nations to help ease financing burdens of the reconstruction process in tsunami- devastated Nanggroe Aceh Darussalam, according to a minister.

The government has considered accepting the offer as it will not be compelled to enter another program with the International Monetary Fund (IMF), or of applying "comparable treatment" towards private sector debts, State Minister of National Development Planning Sri Mulyani Indrawati said on Monday.

"If the two conditionalities are dropped, then there would be no problem for us (in accepting the debt moratorium offer)," she said.

"And so far, the Paris Club has agreed to regard the tsunami disaster as an exceptional case, such that the two terms would not be applied."

Mulyani, however, explained that in taking up the offer the government would have to carefully calculate the shifting of its foreign debt burden over coming fiscal years after the moratorium.

"We have to remember that this is just a suspension of our obligation to repay our debts, and not a writing off of debts," she said.

"We will therefore consult with the House of Representatives concerning our multiyear debt management strategy."

In its meeting last week, the Paris Club agreed to give the two countries most affected by the tsunami disaster -- Indonesia and Sri Lanka -- a moratorium until Dec. 31 on the repayment of their debts, after receiving an assessment from the World Bank and the IMF on their financial needs resulting from the disaster.

The two countries will resume repayment of their debts -- worth US$3.8 billion -- in early 2006, with payments due for 2005 to be paid over four years, starting in 2007.

The government has said that the moratorium would result in a suspension of payments amounting to $2.6 billion. In total, Indonesia owes the Paris Club nations about $48 billion.

The Paris Club had previously given a similar three-month debt moratorium before the assessment, resulting in a postponement of debt repayment of up to $350 million.

Indonesia has objected to linking the debt moratorium with having to undergo another program with the IMF, due in part to public opposition, claiming that the IMF's previous economic recipes had failed to nurture the nation's economy and slowed its recovery after the near-collapse of Indonesia's financial institutions following the Asian financial crisis of the late 1990s.

Indonesia also rejected the so-called "comparable treatment" scheme, which would have meant that creditors would have had to suspend debt repayments of the private sector as well, which would have resulted in a downgrade of their credit portfolio's and cause a downgrade in Indonesia's overall credit rating, which actually improved last year.

Elsewhere, Mulyani said the moratorium would be used for the reconstruction of Aceh, which will start on March 26 and will cost an estimated Rp 45 trillion (US$4.8 billion) over the next five years.

"We will account for all savings resulting from the moratorium, and all donor funds for the Aceh reconstruction, in the revision to this year's state budget," she said.

While welcoming the government's decision to accept the moratorium, House of Representatives member Dradjad H. Wibowo said all money saved as a result of the moratorium must be allocated solely for Aceh's reconstruction program.