Paris Club likely to OK debt delay deal

Paris Club likely to OK debt delay deal

Agencies, Paris, Jakarta

The Paris Club of creditor states would agree on Wednesday on a debt moratorium for countries hit by Asia's tsunami, French Finance Minister Herve Gaymard said.

"We will approve this decision this morning in Paris," Gaymard told Radio France Internationale early on Wednesday, making clear the way to a deal had been paved by the Group of Seven (G-7) rich countries agreeing on a debt moratorium last Friday.

Gaymard said he expected Indonesia, Sri Lanka and the Seychelles to accept the Paris Club deal.

By early afternoon in Paris, no deal had been announced but a news conference was scheduled for 6 p.m. GMT (1 a.m. Jakarta time).

Indonesian Foreign Minister Hassan Wirayuda said he saw support growing at the Club for granting Jakarta a one-year debt moratorium to help it cope with the disaster.

"As of now, some countries have mentioned they would allow debt (servicing) payments to be postponed one year," he told Reuters in an interview. "I think they will reach a consensus on debt relief."

Hassan said on Tuesday that in addition to a debt freeze Indonesia also needed more donations to cope with the disaster.

Australian Prime Minister John Howard said last week he would consider any debt proposal but feared any move to forgive debt or freeze repayments would not help those most in need.

Australia is one of the Paris Club's 19 permanent members, but the group's decisions on debt relief are taken by consensus rather than unanimity.

Gaymard said he told Paris Club officials, who were meeting at the French Finance Ministry, that the G-7 nations -- France, the United States, Japan, Germany, Britain, Italy and Canada -- believed a debt moratorium was vital.

The G-7 countries are all in the Paris Club.

"It appears to members of the G-7 ... that a moratorium is absolutely indispensable in order to allow the affected countries to overcome their immense difficulties," he said. "That is the clear and simple message that brought to the heads of the delegations meeting here."

In Jakarta, local economists grouped under the banner of Indonesia Bangkit (Indonesia Awakens) said earlier that the Indonesian government should have asked for a five-year Rp 100 trillion (US$10.78 billion) debt relief from creditor nations instead of a two-year Rp 30 trillion moratorium.

The Rp 30 trillion amount represents one third of Indonesia's $8.8 billion in scheduled repayments over the next two years to creditor nations.

"This reflects the weakness in strategy and policy of the government's economic team, failing to take advantage of this momentum," Hendri Saparini, an economist with Econit, told a press conference.

She said that offers of debt moratoria are very rare, and Indonesia has missed an opportunity to secure the best possible deal and to ease pressure on the annual state budget.

Stronger words came from senior economist Sri Edi Swasono, who suggested that a write-off would have been better than a debt moratorium for highly-indebted countries such as Indonesia.

At least 106,500 people in Aceh and North Sumatra were killed when a earthquake and tsunami hit both provinces on Dec. 26.