Govt to formally request Paris Club rescheduling soon

Dadan Wijaksana, The Jakarta Post, Jakarta

Finance Minister Boediono said on Wednesday that the government would submit an official request "soon" for the rescheduling of the country's sovereign debt maturing in 2002 and 2003.

Boediono said that the government had engaged in a series of informal meetings with Club members to explain the country's financial position.

"After that we will officially submit the rescheduling request," he told reporters before the signing ceremony for the Asian Development Bank (ADB)'s grants to reform the country's state-owned enterprises.

He said that the rescheduling of both debt principal and interest payments should allow the government to save around Rp 27 trillion (around US$2.6 billion based on the current exchange rate) next year.

The government said earlier that it planned to meet the Paris Club of creditor nations some time in February next year.

Seeking both principal and interest rate rescheduling is something that Indonesia has never done before, but with next year's huge overseas debt payment requirement -- projected at $10.9 billion -- the move seems inevitable.

Despite criticism from economists, the government argues that the rescheduling is necessary to help maintain the 2002 state budget deficit at a sustainable level of 2.5 percent of gross domestic product.

Some economists warned against deferring interest payments, on the grounds that creditors reserved such facilities for heavily indebted poor countries only and that the move could downgrade the country's sovereign rating, creating new pressure on the ailing rupiah.

Indonesia secured a debt rescheduling worth some $5.8 billion, in debt principal only, from the Paris Club last year.

The Paris Club groups together Indonesia's major sovereign creditors for talks on the rescheduling of debt repayments.

As for the response from Club members regarding the informal meetings, Boediono described it as positive, saying: "So far, it appears that many of the creditor nations understand the problems Indonesia is facing. Hopefully, that will turn into support."