Govt told to seek another debt rescheduling

Dadan Wijaksana, The Jakarta Post, Jakarta

House of Representatives Speaker Akbar Tandjung urged the government to seek another debt rescheduling facility next year from foreign creditors.

He said that the rescheduling facility was crucial to help ease the burden on the state budget, so that more funds could be allocated for development programs.

"The House hopes Indonesia can still implement its medium- and long-term development (programs) despite the huge debt burden," he was quoted by Antara as saying on Friday during a plenary session.

The country's foreign debt stood at a staggering US$137.60 billion in 2001, with $74.16 billion owed by the government and $63.44 billion by the private sector.

In 2003, the country's foreign debt due to mature will total $18.7 billion.

In April 2002, the government secured a rescheduling facility from the Paris Club of creditor nations for some $5.4 billion in debt maturing this year and next.

The rescheduling facility allows the government to cap the current state budget deficit at 2.5 percent of gross domestic product (GDP).

In addition to the foreign debt, the government is also saddled with some $60 billion in domestic debt resulting from the costly bank bailout program in the late 1990s.

This makes the government's total debt equal to the country's GDP.

But Minister of Finance Boediono said in April that the government had no intention of seeking another rescheduling facility from the Paris Club next year.

He did not explain the rationale behind his stance, but to seek the help of the Paris Club would require the government to extend the role of the International Monetary Fund (IMF) in the country.

The government had to extend the IMF's program until the end of 2003 as a condition of the April Paris Club rescheduling facility. The program was supposed to end late this year.

The proposed extension of the IMF program here drew strong criticism from a number of sources, including State Minister of National Development Planning Kwik Kian Gie.

The IMF is providing a three-year $5 billion loan program for the country. But the IMF's economically painful programs have often been criticized by politicians.

The rescheduling facility from foreign creditors will allow the state budget to allocate more spending on productive economic activities, which would eventually stimulate economic growth.

In comparison, for foreign debt interest repayments alone, the government has to set aside some Rp 29 trillion this year, not that much less than the Rp 52 trillion it has to allocate for development spending.

Elsewhere, Akbar also urged the government to pay special attention to private sector foreign debt so that it can be made more manageable to prevent a recurrence of what happened during the crisis.

"The government also needs to improve its capability in monitoring and controlling corporate debt," he said, but did not elaborate.

The huge corporate overseas debt is one factor that has produced pressure on the rupiah.