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.