Most creditors to reschedule sovereign debt: Bambang
Most creditors to reschedule sovereign debt: Bambang
JAKARTA (JP): Most government creditors have agreed to
reschedule the majority of the country's sovereign debt due this
year, Minister of Finance Bambang Subianto said yesterday.
"Most of the government's debt which has to be repaid this
year will be rolled over. That's the maximum we can get," he told
House of Representatives commission VIII for the state budget and
finance, and research and technology, at a hearing on the revised
1998/1999 state budget.
He declined, however, to mention the total debt due this year
or how much of it would be rescheduled.
He said that the debt rescheduling could not be done
unilaterally but had to be negotiated bilaterally with the
creditors.
He conceded that it was a difficult choice because it could
hurt Indonesia's credibility in the international community.
"We can't imagine the impact. That's why we resorted to this
option only after serious preparations because we don't want to
send the wrong signal to the market," he said.
Coordinating Minister for Finance, Trade and Industry
Ginandjar Kartasasmita said last week that the government would
reschedule part of its foreign debt to help raise funds to cover
its immediate economic and fiscal needs in the wake of the
country's year-long economic crisis.
He explained that the proposal to pay only the interest would
be discussed and finalized with donor countries at the
Consultative Group on Indonesia (CGI) meeting in Paris on July 29
and July 30.
The government would not discuss the proposal with
multilateral organizations like the World Bank because they have
strict rules which do not allow debt rescheduling, he said.
Ginandjar added, however, that Japan was reluctant to go along
with the debt rescheduling proposal.
"Japan has its own credit policy. Japan prefers to give fresh
money and we repay our debt principal and the interest," he said.
A government source said that the country's sovereign debt due
for installment this fiscal year totaled $2.25 billion. This did
not include the debt installments already made in the first
quarter (April/June) of the current fiscal year.
Donor governments had committed to rescheduling $1.25 billion
of the $2.25 billion, he added.
He explained that Japan rejected the debt rescheduling
proposal because it was not allowed under Japanese law.
"If we make the move unilaterally, Japan will have to stop
lending money both to the government and the private sector," he
said, adding that negotiations with Japan were still continuing.
The official who insisted on anonymity said that the likely
result was that the government would pay the debt in return for
new loans from Japan.
Under the revised 1998/1999 state budget, debt installments
this year were estimated at $4.2 billion, down from $4.9 billion
in the January version of the budget because of the weakening of
the yen against the U.S. dollar.
The government source also said that the Japanese loans might
be part of the $6 billion in additional funding arranged by the
IMF last week on top of the $43 billion bailout fund arranged
last November.
The IMF said last week the additional bailout funds would be
used to finance the gap in the country's huge budget deficit in
the current fiscal year which is envisaged at 8.5 percent of
gross domestic product.
The IMF last week also announced the disbursement of an
additional $1 billion in balance of payments loan for Indonesia,
thereby increasing its disbursement so far to $4.9 billion.
It pledged last week $1.3 billion to the $6 billion additional
bailout funds, thereby raising its total commitment under the
three-year bailout program to $11.3 billion.
Indonesia urgently needs the additional funds to cover the
huge budget deficit projected from financing subsidies and social
safety net programs to help the poor survive the crisis.
The IMF said that several donor institutions and countries,
including the World Bank, the Asian Development Bank, China,
Australia had promised to provide the additional funding. (rei)