Paris Club to suspend debt repayment for RI and Sri Lanka

Paris Club to suspend debt repayment for RI and Sri Lanka

Agencies, Paris/Canberra/Jakarta

Indonesia and Sri Lanka, devastated by the tsunami disaster on
Dec. 26, have been given a moratorium until Dec. 31 on repayment
of their debt owed to Paris Club members, the Paris Club said on
Thursday.

Debt repayments will be rescheduled over five years, the so-
called Paris Club of creditor nations said in Paris.

The decision was made on Wednesday after the Club received an
assessment from the International Monetary Fund and the World
Bank on the needs of Indonesia and Sri Lanka in the wake of the
tsunami, the Club said in a statement.

The Club recalled its announcement after a Jan. 12 meeting
that, in view of the effects of the tsunami and "to allow those
countries affected to dedicate all resources to address
humanitarian and reconstruction needs," it did not expect any
debt payment from tsunami-affected countries until the IMF and
the World Bank had made a full assessment of needs.

"On the basis of the analysis of the situation made by the IMF
and the World Bank, and for debtor countries that have declared
their interest, Paris Club Creditors, consistent with the
national laws of the creditor countries, have agreed not to
expect any debt payment on eligible sovereign claims from those
countries until Dec. 31, 2005," the statement said as quoted by
AFP.

"They offer that the deferred amounts be repaid over five
years of which one year of grace," it said.

Indonesia and Sri Lanka, the only two tsunami-struck countries
that have shown an interest in the Paris Club proposal, will
resume repayment of the debt to Paris Club creditors in early
2006, with the payment due for 2005 to be paid over four years,
from 2007.

"Paris Club creditors expect that the resources freed by this
measure will benefit directly the people affected by the
tsunami," the Club said.

A Paris Club official said the initial amounts owed by the two
countries was a combined US$3.8 billion. He did not provide
specific figures for each country.

Indonesia owes about $48 billion to Paris Club out of a total
of around $272 billion worth of external debt held by tsunami-
affected countries.

"I think we are going to look at it again, but from a cash
flow point of view it would be very hard on us. It would only
increase our burden," Mulia Nasution, Indonesia's Ministry of
Finance Director General for State Treasury, told Reuters in
Jakarta on Friday. "It would not do much help for us."

State Minister of National Development Planning Sri Mulyani
Indrawati said on Thursday rebuilding the country's tsunami-hit
area would cost up to Rp 10 trillion ($1.1 billion) in 2005 and
Rp 45 trillion over the next five years.

Australia, which sent around 1,000 military personnel to
Indonesia as part of the aid effort, agreed to join other Paris
Club creditors in the moratorium offer.

"Australia is pleased that the debt moratorium will be in
addition to the direct assistance already committed by Paris Club
members," Foreign Minister Alexander Downer and Trade Minister
Mark Vaile said in a statement in Canberra on Friday.