Indonesia mulls rescheduling debt

Indonesia mulls rescheduling debt

Rendi A. Witular and Fabiola Desy Unidjaja, The Jakarta Post, Jakarta

The Indonesian government wants to reschedule its debts with
foreign donors to finance the reconstruction of damaged
infrastructure in Aceh and North Sumatra following the Dec. 26
earthquake and tsunami.

The country is facing a projected widening state-budget
deficit from the calamity.

"I am optimistic that we can reach an agreement for debt
rescheduling outside of the IMF (International Monetary Fund)
legal frame as this is for humanitarian aims," Minister of
Finance Yusuf Anwar said on Monday.

"We expect the donors to agree to the rescheduling as most of
the funds to pay the debts will be allocated to restore damaged
infrastructure in Aceh and North Sumatra instead."

He added that rescheduling should be without any conditions
that could lower the sovereign rating of the country.

The IMF is considering granting Indonesia debt relief to help
cushion the massive financial impact of the calamity. The offer
came after Italy, Germany and the U.S. indicated their
willingness to consider offering debt relief to tragedy-hit
countries, including Indonesia.

The rescheduling is expected to be proposed without the IMF as
an umbrella and assistance to the deal, since Indonesia is no
longer under the IMF program.

Yusuf said the debt rescheduling was likely to be pursued
under a bilateral negotiation with each of the foreign lenders or
under the Paris Club facility.

The Paris Club is a group of Indonesia's creditor nations,
which could negotiate for and reschedule debts, both principal
and interest. It has been used in order to ease the country's
huge burden of servicing foreign debt.

With a deficit estimated at 1 percent of gross domestic
product (GDP), Indonesia has the tremendous burden of refinancing
some Rp 46 trillion (US$5.11 billion) maturing foreign debts this
year, limiting the availability of extra funds for reconstructing
devastated Aceh.

"We hope the aid for Aceh provided by our foreign creditors
can be in the form of rescheduling our maturing debts this year,"
Yusuf said, adding that the debts account for some 30 percent of
this year's expenditure.

Coordinating Minister for the Economy Aburizal Bakrie said
earlier that Indonesia would need at least Rp 10 trillion to
rebuild Aceh.

State Minister of National Development Planning/National
Development Planning Board chairwoman Sri Mulyani Indrawati said
the government would discuss the reconstruction of Aceh in a
preliminary meeting with the Consultative Group on Indonesia
(CGI) this week as part of the government's effort to seek more
aid from the group.

"Our initial plan was to reduce the debts offered by the CGI
to plug this year's state budget deficit. Due to the calamity, we
expect a pledge worth some $2.4 billion, similar to last year,"
she said.

The government also expects the CGI to offer additional soft
loans to help finance the reconstruction of Aceh.

Mulyani was optimistic that Indonesia could still finance the
reconstruction of damaged infrastructure using the funds from
public donations and foreign aid if the group refused to provide
more loans.

Yusuf also announced that last year's state-budget deficit
amounted to Rp 27.8 trillion, or 1.4 percent of GDP, higher than
the initial projection of Rp 26.3 trillion, or 1.3 percent of
GDP.