Japan, RI to map out details of debt soon

Japan, RI to map out details of debt soon

TOKYO (Reuters): Japan will agree soon with Indonesia over details of a sovereign debt restructuring plan, in line with a pact between the Paris Club and Jakarta to reschedule $5.8 billion in debt, Japanese officials said on Tuesday.

The Paris Club of creditor nations last year sealed a pact to restructure $5.8 billion of Indonesia's sovereign debt, a little less than half of which is owed to Japan, the officials said.

"The two parties have not signed a letter of agreement, but we can say that we are, in principle, in agreement," a Japanese government source told Reuters, adding they would probably sign an official agreement this month.

After last year's Paris Club deal, Indonesia has been negotiating a bilateral rescheduling scheme with Japan, its biggest creditor and aid donor, including details on interest rates for the loan repayment.

Under the Paris Club agreement, there will be a grace period of 20 years for official development assistance (ODA) loans to be paid and of 15 years for other loans for bilateral rescheduling.

The debt restructuring agreement was thrown into question when the International Monetary Fund (IMF), whose backing is crucial for Indonesia's relations with other donors, decided to delay a $400 million loan disbursement late last year because of concerns over Indonesia's reforms, required under terms of a $5 billion three-year loan program.

But the Japanese government source said Indonesia has been making progress in talks with the IMF over its loan program.

Indeed, that appeared to be the case after the IMF on Tuesday said a team would go to Jakarta to review the reform program after a panel completes its work on proposed changes to the central bank law.

The eagerly awaited visit of the IMF review team paves the way for the disbursement of the fresh $400 million loan, and hence reinforces the Paris Club agreement.