Govt to accept debt moratorium offer: Minister

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.