Govt will not seek fourth Paris Club deal
The Jakarta Post, Jakarta
Despite the devastating impact of the Bali bombing on the economy, the government said it would maintain its commitment not to seek further debt restructuring facilities through the Paris Club of creditor nations.
"Despite what has happened in Bali, our commitment that we will not seek a fourth edition of debt relief from the Paris Club remains," Coordinating Minister for the Economy Dorodjatun Kuntjoro-Jakti told a seminar here on Tuesday.
The Paris Club, which groups together the country's major sovereign creditors for talks on debt rescheduling, granted the country in April a restructuring of some US$5.4 billion of a total $7.5 billion in foreign debt due between April 1, 2002 and Dec. 31, 2003.
Government officials have since repeatedly stated that the April deal was the last, saying that any restructuring of foreign debts would no longer be needed in the future, based on an assumption that the country would experience a zero deficit in its state budget for the 2004 fiscal year.
However, the recent bomb blasts in Bali have cast doubts over the government's capability to meet the zero deficit target. The impact is expected to be so huge that the government decided to revise almost all assumptions in the 2003 draft budget, including the deficit target.
The figure is not yet final, but it is widely expected that the deficit target would be raised from the initial Rp 26 trillion, or 1.3 percent of the country's gross domestic product (GDP), to between 1.6 percent and 2 percent of GDP.
The higher-than-expected deficit comes partly as a result of higher spending in productive sectors.
The government plans to increase the budget for development spending next year to boost economic activities in a bid to maintain high economic growth despite the damaging impact of the Bali bomb blasts on the economy.
The government now has a staggering $131 billion in total debts, or around 90 percent of GDP, including $70 billion in external loans. This year alone, budget allocation for the servicing of the debt reached Rp 136.2 trillion.