Tue, 16 Aug 1994

NAM calls for substantial debt reduction

JAKARTA (JP): The Non-Aligned Movement (NAM) wound up a three- day meeting on external debt here yesterday by calling for substantial exemptions in the external debts of least-developed countries.

The meeting's chairman, Saleh Afiff, told reporters that the substantial debt exemptions are the most appropriate approach for solving the debt crises of developing countries.

"The meeting agreed that debt rescheduling has failed to alleviate the heavy debt servicing burden, particularly if cut- off dates are not sufficiently advanced," he said following the meeting, which was attended by the movement's 31 least-developed members.

Afiff, Indonesia's Coordinating Minister for Economy and Finance, said the appeal, contained in the chairman's report rather than in a joint statement, will be sent to donor countries and multilateral financial institutions.

He said the NAM chairman would not put forward the proposal to creditor countries and multilateral financial agencies in a formal meeting but would, instead, encourage member countries to strengthen bilateral cooperation with their creditors.

"The meeting put forward general principles in settling the debt problem while the debt settlements will be carried out by each borrowing country," he said.

The proposal was adopted from the report of the NAM's ad hoc advisory group on debt, which urged lenders to reduce the debt of least-developed countries by 70 percent through a case-by-case approach.

In 1992, there were at least 58 heavily indebted countries, of which 32 were classified as least-developed countries. The actual arrears of the 32 countries were much larger than the 20 percent threshold: 91 percent had arrears exceeding 50 percent, half had arrears exceeding 86.7 percent and 39 percent had arrears in excess of 90 percent.

The total long-term debt of those countries in 1992 amounted to US$247.6 billion, 26 percent of which was owed to multilateral financial institutions, 49 percent to governments and their agencies and 24 percent to private creditors.

Afiff acknowledged that it would be difficult to convince the lenders about the NAM's debt reduction proposal, especially to multilateral financial agencies which mostly reject the debt cut approach in solving the debt crisis.

"Unlike multilateral agencies, some donor countries have used a debt reduction approach in dealing with debt problems," he said.


Besides discussing the debt relief proposed by the NAM's advisory group, the ministerial meeting also heard about Indonesia's experience in handling its debt and managing its economy.

Members of President Soeharto's team of experts, including Widjojo Nitisastro, Ali Wardhana, Radius Prawiro, Mohammad Sadli, Suhadi Mangkusuwondo and Emil Salim, were among the speakers at the meeting.

Indonesia, which has foreign loans of some US$90 billion, has been widely recognized for its successful debt management.

Afiff said that the meeting agreed that substantial debt reductions alone would not result in economic growth and development.

"The heavily indebted nations should seek to restore macroeconomic stability through fiscal and monetary discipline if they are to create the necessary preconditions for growth," he said.

The meeting also expressed grave concern over the proliferation of conditionalities attached to the transfer of financial resources from developed countries and multilateral financial institutions.

"While conditionalities related to the use of resources are necessary and legitimate, the meeting rejected applying political or other ideologically-motivated conditionalities," Afiff said.

"There is, thus, an urgent need to reduce the number and types of conditionalities and to limit them to the essential objective of financial assistance," he said.

The delegates of the meeting will attend a House of Representatives (DPR) session today as well as the commemoration of Independence Day tomorrow. (hen)