Govt uncertain over Paris Club debt rescheduling

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)