Indonesia begs donor nations to reschedule US$6b debt

JAKARTA (JP): Indonesia has asked the Paris Club donor nations to reschedule some US$6 billion in sovereign debt due in 2000/2001 and 2001/2002 fiscal years, said Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita.

"(Debt rescheduling) for one year is $3 billion, and for two years it's $6 billion," he told reporters after meeting with President B.J. Habibie on Tuesday.

He said that he made the proposal to the U.S. and Japanese governments, and the International Monetary Fund (IMF) during a recent overseas trip.

"We have asked the U.S. government and also the IMF to help discuss the matter," he said.

Ginandjar recently met with U.S. Treasury Secretary Lawrence Summers, IMF Managing Director Michel Camdessus and the Japanese government.

"We hope that the U.S. Treasury Secretary will coordinate with the IMF, G-7 nations and the chairman of the Paris Club. Let's wait for the outcome," Ginandjar added.

Ginandjar explained that debt rescheduling was crucial for the country's ailing economy as export performance was still weak and foreign investment was still low as investors were waiting for improvement in the political situation.

He added that overseas aid to help finance the state budget could not be expected immediately.

"So there will be quite a large financing gap. If this is burdened by debt repayment (it will be) very hard," he said.

Ginandjar said that the Paris Club creditor grouping was scheduled to convene late in September or in early October, but he preferred that the meeting be conducted before President B.J. Habibie makes his accountability speech in October or November at the People's Consultative Assembly (MPR), the country's highest legislative body.

The Assembly will also elect the country's next president after Habibie makes the accountability speech.

Habibie is facing serious obstacles in his election bid in the wake of the high-profile Bank Bali scandal and bloody riots in East Timor.

Ginandjar said that if the Paris Club meeting would be conducted after the presidential election, the newly formed government would have a very limited time to make negotiations.

"But we realize that the new government will have limited time," he said.

The Paris Club agreed in September last year to reschedule a $4.2 billion debt falling due in March 2000 to between 11 and 20 years.

Analysts are skeptic, however, if the Paris Club would grant another debt rescheduling facility to the administration of Habibie amid signs of slowness and lack of seriousness in resolving the Bank Bali scandal and the East Timor problem.

The IMF and the World Bank have repeatedly warned Habibie to satisfactorily resolve the bank scandal or budgetary support would be stopped.

The Bank Bali scandal revolves around the "illegal" transfer of Rp 546 billion (US$80 million at current rate) to a private firm linked to Habibie's inner circle. The Habibie camp has been alleged of trying to raise funds to bankroll Habibie's November presidential race.

The international community has also lambasted the government of turning a blind eye to the attack made by prointegration militiamen against the proindependence group after last week's referendum result, in which 78.5 percent of East Timorese voted for independence. (rei/prb)