Sat, 14 Oct 2000

Govt told to ask for debt haircut at CGI meeting

JAKARTA (JP): The House of Representatives suggested on Friday the government request a debt haircut from donor countries under the Consultative Group on Indonesia (CGI) during the upcoming meeting in Tokyo.

"There have been suggestions to erase part of the payments of debt principles owed to CGI members," Coordinating Minister for the Economy Rizal Ramli told reporters.

Rizal met House members to receive their inputs before heading for Tokyo for the two-day CGI meeting next week.

"We will respond to them (the suggestions) as best we can," Rizal said.

He said House Speaker Akbar Tandjung had explained to him the people's aspirations toward Indonesia's mounting debts.

Indonesia's foreign debt as of March 2000 totaled US$144.24 billion, $75.04 billion of which consisted of government debt and $69.2 billion were private companies' offshore debts.

Since July 1997 the country obtained over $29 billion in loans from international creditors, including CGI and the International Monetary Fund (IMF), and had repaid over $8.9 billion of its offshore debt.

In the upcoming CGI meeting, Indonesia expects to receive $4.8 billion in soft loans to help ease the government's deficit.

The World Bank-chaired CGI, which groups Indonesian creditors, will meet in Tokyo on Oct. 17 to Oct. 18 to decide new loan commitment.

Indonesia expected the donor groups to provide $4.8 billion in new loans during the meeting.

Rizal said several House members had argued that Indonesia was not poor enough to receive a debt haircut.

Others, however, had maintained that it was not about whether Indonesia was poor or not, he said.

According to them, rampant corruption within the old government had made it unfair to force Indonesians to repay their debts in full, he added.

"At this moment, the Indonesian government remains undecided over the different suggestions," Rizal said.

A World Bank internal memorandum in 1998 implicated Indonesian government officials in siphoning off more than 20 percent of the bank's loans.

The report said that much of the corruption involved state contracts with firms owned or controlled by government officials and their relatives.

The worst cases of embezzlement, 25 percent or more, were found in the ministries of home affairs, transmigration and forestry, according to the report.

Attending the meeting with the House were among others Finance Minister Prijadi Praptosuhardjo, acting Bank Indonesia governor Anwar Nasution and Attorney General Marzuki Darusman.

Rizal further said that at the CGI meeting, the government would try to obtain financial aid from the International Development Assistance (IDA), a finance arm of the World Bank.

He explained that IDA offered interest rates of nearly zero percent over a 30-year loan period.

"This way, there will be a re-financing of our debts so that average interest rates will drop," Rizal said.

IDA reserves its aid for very poor countries only and Indonesia has been crossed off its list after the oil-boom in the early eighties pushed the country's income per capita above IDA's criteria.

However, since to the economic crisis, Indonesia's income per capita sank to about $600 from a level of $1,000. (bkm)