Japan agrees to reschedule RI's $2.8b sovereign debt

Japan agrees to reschedule RI's $2.8b sovereign debt

JAKARTA (JP): The Japanese government finally signed a formal agreement with the government of Indonesia on Friday to reschedule the latter's US$2.8 billion sovereign debt maturing between 2000 and 2002.

The agreement was signed here by the Director General for Foreign Economic Relations of the Ministry of Foreign Affairs Makarim Wibisono and the Japanese Ambassador in Indonesia Yukio Takeuchi.

The debt will be rescheduled into 15-20 years, but the country must start making installment by 2004.

The debt rescheduling is part of the agreement reached by the government in April 2000 with the Paris Club of creditor nations to reschedule Indonesia's $5.8 billion sovereign debt.

Under the Paris Club mechanism, the government must further negotiate with individual creditor nations over details of the rescheduling.

The government has been trying to reach a final deal with the Japanese government, the country's largest creditor, for about a year.

Masaya Fujiwara, counselor of economic and development of the Japanese Embassy, said that around 50 percent of the debt or $1.4 billion matured between April 2000 and March 2001, and the other half matured in April 2001-March 2002.

He said that the rescheduling of the $1.4 billion debt maturing in April 2001-March 2002 would only be implemented if Indonesia reached a new economic agreement with the International Monetary Fund (IMF).

"It will also be executed if the Indonesian government reach an agreement with the IMF," he said, adding he was optimistic that Indonesian government and IMF would reach a deal.

Relations between the government and IMF turned ugly after the latter delayed the disbursement of its next loan tranche to the country late last year amid signs that Indonesia was wavering with the implementation of agreed economic reform program.

The worsening relations with the IMF had raised concern that the government might fail to obtain the debt rescheduling facility from the Paris Club, which is crucial to the survivability of the 2001 state budget.

But new Coordinating Minister for the Economy Burhanuddin Abdullah expressed optimism earlier this week that the IMF would finally send its review mission to Jakarta sometime next month to make a new agreement, which would pave the way for the disbursement of the IMF loan.

Takeuchi said that the rescheduling demonstrated a strong support from the Japanese government to help Indonesia focus on its economic reforms.

"We would like to see the Indonesian economy get back in the right track and then grow continuously," he told reporters after the signing ceremony.

Meanwhile, Makarim said that the Japan's loan rescheduling would enable the government to maximize government revenue for the country's development.

"It is very helpful for the country as the debt maturities are delayed between 15 and 20 years," he said.

Finance Ministry officials have earlier expressed optimism that other Paris Club members would also finally sign a debt rescheduling agreement with Indonesia. (05)