Paris Club expects RI to suspend its debt repayments

Paris Club expects RI to suspend its debt repayments

PARIS (Agencies): A Paris Club official said yesterday that
Indonesia was expected to suspend some debt repayments in August
ahead of a September agreement on the treatment of its debt.

Asked to comment on newswire reports that Indonesia had
defaulted on a sovereign debt repayment, the official said: "It
was expected within the framework of the treatment of their
sovereign debt...that the August repayment would be suspended."

"In September we're going to have an agreement on their debt
treatment," the official, who asked not to be identified, said.

The official did not say how much the suspended repayment was
worth and said it would have been due around the beginning of the
month, but said that the suspension was in line with agreements
reached.

In Jakarta, Coordinating Minister of Economy, Finance and
Industry Ginandjar Kartasasmita said yesterday Indonesia began to
reschedule its sovereign debt this week in line with agreements
with its major international lenders,

Speaking to Dow Jones Newswires, Ginandjar said reports that
the country had missed sovereign debt payments were inaccurate,
stressing that the country had simply begun to implement an
agreement reached with the International Monetary Fund.

"We have already notified the Paris Club (of creditor nations)
about this...we are actually not reneging, just implementing the
agreement," Ginandjar said.

"It's part of the package we have worked out with the IMF of
US$6.2 billion already incorporated in our budget," he said.
"It's clear, it's transparent. It's nothing new, it shouldn't
shock the markets."

Ginandjar confirmed that Indonesia would continue to pay
interest on its debt, as agreed with its lenders.

"We were advised by the IMF that we could already notify (our
lenders) and start to reschedule sovereign debt immediately,"
Ginandjar said, adding that the government was also advised on
the matter by the Group of Seven leading industrialized nations.

A German banker involved in lending to the country said
yesterday that Indonesia had not indicated to German commercial
bankers that it was not able to make payments on outstanding
sovereign debt.

"We haven't experienced any defaults (on interest payments) on
the sovereign debt we are exposed to, nor have we heard" of any
defaults at other German banks, the banker said.

His bank, for one, punctually received payment of interest due
on Indonesian government debt in July and still expects to
receive the next payment scheduled in December, he explained.

The official did not say how much the suspended repayment was
worth and said it would have been due around the beginning of the
month, but said that the suspension was in line with agreements
reached.

On July 30, international donor nations pledged $7.9 billion
in aid this year to help Indonesia's devastated economy recover.

Meanwhile, a senior official at rating agency Standard &
Poor's said that Indonesia's debt rescheduling talks relate to
inter-governmental debt and do not at present include rated bonds
issued by the country.

But the talks to reschedule Indonesia's sovereign debt via the
Paris Club of official creditors could end up being complex and
may result in some form of debt relief, David Beers, managing
director for sovereign ratings at S&P said.