Indonesia to meet Paris Club to rehash debt issues

Indonesia to meet Paris Club to rehash debt issues

JAKARTA (JP): The government plans to meet with the Paris Club
of government creditors in September to negotiate another debt
rescheduling, said the Coordinating Minister for Economy, Finance
and Industry Ginandjar Kartasasmita.

Ginandjar said on Wednesday that the government was seeking to
reschedule between US$2.6 billion and $3 billion because the
country's economy might not fully recover from its crisis within
the next two to three years.

"Within the next two to three years our economy may not likely
recover fully to the precrisis growth rate. Therefore we still
need some breathing space for stimulating economic activities,"
Ginandjar told reporters prior to a monthly Cabinet meeting.

Ginandjar explained that the Paris Club previously rescheduled
some $4.2 billion in debt principals, originally due between
August 1998 and end of March 2000, with maturities between 11 and
20 years.

"Without another package of rescheduling, we should start
repaying our debt again on April 1, but we know that our economy
has not recovered yet to support such a debt service," he said.

He explained that if creditor nations endorsed the debt
rescheduling proposal, it would be an option for the new
government.

"If the next government still insists on repaying the debt on
schedule, they can do that. It would be an open option," Ginanjar
said.

Indonesia is set to hold a presidential election in November.

Indonesia's sovereign debt is estimated at more than $70
billion after the Consultative Group on Indonesia (CGI) donor
nations agreed last month to provide the country with some $5.9
billion in new loans to help finance the 1999/2000 budget deficit
estimated at 5.8 percent of gross domestic product (GDP).

Several politicians urged the government to ask for another
debt rescheduling from the Paris Club as the country would be
overburdened with the huge cost of various crisis-remedy
programs, particularly the bank restructuring and
recapitalization program which was estimated to cost some Rp 550
trillion.

But some analysts warn that such a measure may cause the
country's economic risk to increase, making it much costlier to
raise money from the international market.

Others were afraid that the debt rescheduling measure might
completely close the international financial market to Indonesia
since the country had in the past gained the reputation of a
"good boy" who always repaid its obligations on time.

The government also dropped a suggestion to ask for debt
forgiveness on grounds that such a measure would send Indonesia
into the ranks of most poor nations.

The government was criticized for a massive leakage in foreign
loans, which, according to a recent internal World Bank memo,
amounted to some 20 percent of the World Bank's loans to the
country, most of which ended up in the pockets of government
officials.

U.S. expert on Indonesia, Jeffrey Winters, said last month
that Indonesia had to have a new clean government which was not
linked to the past to allow the country to demand the World Bank
also be responsible for the massive loss and inefficiency in the
use of foreign loans.

He said that the World Bank's founding charter stipulated that
it should also be responsible for the embezzlement of its loans.

"But the current government can't do that because they're also
part of the corruption," Winters said. (rei/prb)