Mar'ie seeks debt reduction

JAKARTA (JP): Minister of Finance Mar'ie Muhammad has called on multilateral lending institutions to slash the debt obligations of the world's poorest countries and restructure themselves to serve the changing world economy.

Speaking at the 1995 joint annual International Monetary Fund- World Bank meeting in Washington on Tuesday, Mar'ie said that despite the rapid changes in the world economy, overall changes on the part of the multilateral organizations have been slow.

"The changes in the world economy demand that we rethink the role of the international institutions and reshape them to serve our future needs," Mar'ie said in his speech, a copy of which was made available here yesterday.

Mar'ie said the ultimate goal of the reform proposed is to renew the significance and contribution of the multilateral lending institutions to growth, equity and stability in a newly- globalized world economy.

The reformed institutions, however, should not compete with the private sector. "We do not need multilateral organizations to do what private institutions can do perfectly well," Mar'ie said.

He also expressed appreciation for the initiative of the president of the World Bank, James Wolfensohn, in setting up a separate fund for the purpose of multilateral debt-reduction.

"Up to recently, the very idea of multilateral debt reduction was considered by some circles as unnecessary and irrelevant. Even the existence of a multilateral debt problem was questioned," Mar'ie said.

Debt burden

Mar'ie said that Indonesia, as chairman of the Non-Aligned Movement, wants the multilateral creditors to pay closer attention to the debt burdens and debt overhang of many developing countries, in particular the poorest countries, which are far from being resolved.

In his speech to participants in the World Economic Forum in Singapore last month, President Soeharto criticized multilateral creditors as being unwilling to even discuss the possibility of debt reduction.

Soeharto urged multilateral creditors to slash debt obligations of the world's poorest countries, as had been done by bilateral and commercial creditors.

What is required from the multilateral institutions now is not further debt rescheduling but a once-and-for-all debt settlement, through meaningful reduction of all categories of debts, Mar'ie said yesterday.

He said that for many poor countries the servicing of multilateral debts has become the bulk of debt service payments. At present it is impossible for debtor countries to have their debts rescheduled, let alone see a reduction in their multilateral debts.

"As a matter of fact, many poor debt-distressed countries are able to service their multilateral debts because they do not service their bilateral debts fully," Mar'ie said. "As a consequence, while they service their multilateral debts, at the same time they are forced to accumulate large and growing arrears on their bilateral debts."

He asserted that debt reduction by multilateral institutions will not jeopardize their credit rating. The multilateral financial institutions are not only financially strong, but their reputation in international markets depends on capital guarantees from their members, particularly major developed countries.

Quoting the Communique of the G-7 Summit in Halifax, Canada, on June 15-17, Mar'ie said the G-7 countries have recognized the existence of a substantial multilateral debt problem and have asked the Bretton Woods Institutions to find a solution to the problem.

"Thus, the G-7, the Non-Aligned Movement, other members of the World Bank and the Fund, the Non-Governmental Organizations and the rest of the international community are emphasizing the urgency to arrive at effective solutions to the debt problems of the poorest countries," Mar'ie said. (rid)

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