Govt uncertain over Paris Club debt rescheduling

JAKARTA (JP): The government is still uncertain as to whether it will be able to obtain a vital rescheduling facility from the Paris Club of creditor nations of some US$2.7 billion in sovereign debt maturing this year given its continuing dispute with the International Monetary Fund (IMF).

Minister of Finance Prijadi Praptosuhardjo said on Wednesday that the Paris Club would only implement the debt rescheduling agreed last year if the government managed to secure a new deal with the IMF.

"They (the creditors) are still waiting for a deal between the government and the IMF," Prijadi told reporters following a meeting with local representatives of the IMF and the World Bank at the Ministry of Finance.

"The rescheduling facility is crucial (for the viability of the 2001 state budget)," he added.

The government reached an agreement with the Paris Club in April 2000 to reschedule some $5.8 billion in sovereign debt maturing between 2000 and 2001.

But the IMF suspended its financial support to the country late last year and the Paris Club has also decided to delay the rescheduling of debts maturing this year, though the rescheduling of debts maturing last year has already been implemented.

The rescheduling facility for the $2.7 billion debt is crucial for the 2001 state budget as the government has assumed that it would not have to repay such a huge sum this year.

The state budget is already seriously threatened by the sharp plunge in the rupiah and the rising interest rate, which may widen the budget deficit to a dangerous level of around 6 percent of gross domestic product (GDP), compared to the initial target of 3.7 percent of GDP.

The government has revised the current state budget and has proposed certain measures including raising fuel prices, tax revenues and cutting down spending to help contain the deficit at a safer level of around 3.8 percent of GDP. The revised budget has been proposed to the House of Representatives for deliberation.

The government has obtained approval for the rescheduling facility from most members of the Paris Club through a bilateral negotiation process.

Although the creditors agreed last year to reschedule Indonesia's sovereign debt under the umbrella of the Paris Club, the government is also required to hold further bilateral talks with each of the creditor nations. If one of the creditors subsequently disapproves, the initial agreement might not be implemented.

The government had earlier aimed to obtain approval from all individual members of the Paris Club by the end of this month.

Prijadi admitted that some members had yet to provide their approval, but declined to say which creditors due to the country's continuing difficulties with the IMF.

A government source had earlier said that out of the 17 members of the Paris Club, only Australia, Canada, and France with a total outstanding loan of around $100 million have yet to approve.

"The implementation of the Paris Club rescheduling facility depends on the IMF," said Anggito Abimanyu, an expert at the finance ministry.

But the agreement between the government and the IMF also remains uncertain due to a dispute over the controversial amendment of the central bank law.

The dispute centers on the government proposal to dismiss the existing Bank Indonesia board of governors once the House approves the proposed bill on the amendment of the Bank Indonesia law. The proposal is known as Chapter 75 of the bill.

But a panel of experts, jointly set up by the government and the IMF to review the proposed amendment, had suggested the government scrap Chapter 75. The IMF has insisted the government follow the recommendations of the panel before a new deal can be made. The government has yet to decide on this issue. (rei)