Indonesian debt team to meet creditors in Tokyo

JAKARTA (JP): The government-appointed private offshore debt team and international creditor banks will meet in Tokyo on May 7-10 to discuss a broad agreement to restructure the country's huge private debt.

Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita said yesterday he would attend the debt restructuring meeting during his visit to Japan next week.

"I hope the next meeting on the private debt problem will be able to build on progress made at the previous meeting in New York," Ginandjar said after attending a consultative meeting between President Soeharto and the speaker and faction leaders from the House of Representatives at the Bina Graha presidential office.

The two parties agreed to a general framework when they last met in New York on April 15 and 16.

At the New York meeting, Indonesia put forward a plan to restructure its mammoth US$68 billion private debt based on the Ficorca program used by Mexico in the early 1980s.

The chairman of the private offshore debt team, Radius Prawiro, said Thursday evening that the government would soon form the Indonesian Debt Restructuring Agency (INDRA) which would function like Ficorca.

"The government prefers to use their own name rather than adopt a foreign name like Ficorca," Radius said.

The Mexican program allowed companies to repay foreign debt in pesos to Ficorca, which then paid foreign creditors in dollars. By doing so, the Mexican government did not technically assume responsibility for the loans, only the foreign exchange losses.

On Thursday, the team will meet with the co-chairman of the steering committee of creditors. The full meeting with creditors is scheduled to start on Friday.

Meanwhile in New York, bankers said Indonesian corporations' international creditors were in place and completing reports to present in Tokyo next week.

"The subcommittees are doing good business and are preparing updates on the work done," a banking source told Dow Jones Newswires.

Four separate subcommittees have been formed -- one to deal with a plan to restructure Indonesia's corporate debt, one to gather key economic data, another to look at trade finance and a fourth to focus on inter-bank lines and the money market.

A banker said members of the subcommittee on economic data had met with the International Monetary Fund (IMF) in Washington and officials in Jakarta in an attempt to gather data.

The IMF is expected to approve the release of one of a series of three monthly outlays to Indonesia next Monday. The funds are part of a $43-billion aid package arranged for the country by the IMF.

Banking sources said the subcommittee working to restructure Indonesia's corporate debt had reached a "consensus about what types of things banks want in there", and would forward a report to the full steering committee Friday.

Commenting on Indonesia's stated goal of keeping local interest rates high to support the currency, a banking source said, "They are still trying to talk the rupiah up to Rp 6,000 (rupiah to the dollar), but they have a long way to go."

Under the Indonesian proposal, the exchange rate would be determined by market forces. The exchange rate would be determined by taking the lowest in a series of 20-day rolling averages of the rupiah value during a six-month eligibility period. The stronger the currency during that period, the lower the government subsidy.

The rupiah closed at Rp 8,000 to the dollar on the spot market yesterday, almost unchanged from Thursday.

Bankers reiterated that the payment of about $700 million in trade finance arrears owed to foreign banks by Indonesian banks is crucial to the negotiations.

"This will be a hot topic at the next meeting," a banker predicted.

Bank Indonesia Governor Sjahril Sabirin said last week that the government would settle the arrears, which the central bank agreed to guarantee in January. But so far no payments have materialized, bankers said. (prb/rid)