Nine states offered debt relief

Nine states offered debt relief

Agencies, Jakarta

Wealthy creditor nations have offered to let nine tsunami-hit countries halt repayments on billions of dollars of debt, but only three said they planned to accept the Paris Club's proposal.

Jean-Pierre Jouyet, chairman of the Paris Club of creditor nations, said in Paris that countries directly affected by the Dec. 26 Indian Ocean earthquake and tsunami could halt debt repayments if they wanted to.

The moratorium could last up to a year, depending on assessments by the International Monetary Fund. It will "allow these countries to dedicate all available resources to address humanitarian and reconstruction needs," Jouyet was quoted by AP on Wednesday.

Only Sri Lanka, Indonesia and the Seychelles have expressed interest so far. Some countries have suggested that a debt moratorium is not the most appropriate response to the disaster.

Indonesia, while signaling that it plans to take up the offer, has said cash would be more useful. The country would be the biggest beneficiary of the moratorium, saving US$3 billion in debt repayments due this year, Jouyet said.

"We will continue to have discussions on this offer of a debt moratorium," Indonesian Foreign Minister Hassan Wirayuda was quoted by AFP in Berlin after talks with German counterpart Joschka Fischer.

"They want grants," German Finance Minister Hans Eichel said. "Indonesian creditworthiness in capital markets shouldn't be damaged under any circumstances."

The most indebted of the affected countries, Indonesia was also hardest hit by the earthquake and tsunami with more than 110,000 people killed.

In Jakarta, the government says it will carefully consider the offer from the creditor nations.

"If the offer does not fit our policies, we will not submit any request for a debt moratorium," Minister for Finance Yusuf Anwar said on Thursday.

"The assessment will take up to three months before the Paris Club considers further policies based on each country's situation and request."

Coordinating Minister for the Economy Aburizal Bakrie said the government would not be hasty in accepting the debt moratorium offer, although its immediate $350 million relief during the three-month assessment period would certainly ease the debt burden on the state budget.

"We can ask for a moratorium of up to five years but only if we join the IMF program, which we don't want to do," he said.

The previous government terminated all IMF programs last year although the country is still under a post-program monitoring scheme following public pressure.

The central bank's foreign affairs director, Kusumaningtuti, said Indonesia could have received debt relief of nearly $5 billion if the government could convince the Paris Club that the country was highly indebted due to the tsunami.

The Paris Club's Naples Terms, she said, stipulates that a debt reduction can reach up to 67 percent of the total non- official development foreign debt in the form of non-official development assistance (ODA).

She added that Indonesia could also request debt cancellation of up to $218.5 million from various projects in Aceh and North Sumatra which were financed by foreign loans.

"The projects are now devastated and rendered useless by the disaster, so it is only appropriate that repayment of the loans are canceled," she said.

Kusumaningtuti suggested that the government intensify the implementation of debt swap schemes with creditor countries, which could see debt relief of up to $818 million, particularly with Indonesia's major creditor Japan. Japan has contributed 35 percent of the country's outstanding foreign debt of $79 billion.