RI hopes for debt payment suspension by Paris Club

Fabiola Desy Unidjaja and Urip Hudiono, The Jakarta Post, Jakarta

Indonesia hopes to get at least a two-year suspension for the payments of its foreign debts, with the largest part expected from Japan.

Coordinating Minister for the Economy Aburizal Bakrie said on Monday that the government was waiting for the final say from the Paris Club meeting on Wednesday, which will be attended by State Minister of National Development Planning Sri Mulyani Indrawati.

"We hope the payments can be delayed to at least 2007," he said at the State Palace after a meeting between President Susilo Bambang Yudhoyono and German Foreign Minister Joschka Fischer.

Indonesia's foreign donors will likely grant a total debt moratorium of up to Rp 30 trillion (US$3.23 billion), with Rp 12 trillion expected from Japan, according to Aburizal.

Indonesia owes the Paris Club of creditors nations about $42 billion of the country's total external debt of about $81 billion. For this year, it was supposed to repay about $4.8 billion.

Aburizal explained that the 2005 and 2006 State Budgets carried the maximum burden for debt service, but the Dec. 26 tsunami that hit Aceh and North Sumatra and killed well over 100,000 people would hamper the government's ability to fulfill the original allocation.

Fischer said Germany and other European countries were ready to discuss the possibility of providing debt relief for the suffering countries. "We are ready to discuss all options and further steps ... I think all options are open in a constructive way in the Paris Club."

France finance minister Herve Gaymard told Radio Europe 1 on Sunday that providing a freeze on debt payments for Indonesia this year would give Jakarta additional resources for relief and reconstruction "to the tune of $3 billion, that's not negligible".

Separately, Japanese Ambassador to Indonesia Yutaka Iimura said his government had also increased its grant to Indonesia from $130 million to $146 million.

Minister of Finance Yusuf Anwar was confident that the creditor countries would not apply a "comparability term" that would affect Indonesia's credit rating and investment grade.

"The disaster in Aceh is of a massive scale with a massive humanitarian aftermath," he said. "

Yusuf said a "comparability term" applied with the debt moratorium scheme would imply that private lenders from the respective countries would also be subject to the scheme's terms, such as having to reschedule all their loans, including those owed by Indonesian private sector.

Such a situation, he added, would make the private sector experience a conditional inability to service their debts.

Global rating agency Standards and Poor's had said that Indonesia's current credit rating of B+ would not be affected by the offers, because they were due solely to the disaster.

The finance ministry's financial planning agency head, Anggito Abimanyu, said the government would try to maintain the debt ratio at a manageable level despite the possibility of an increase of debt from aid pledges for Aceh in the form of soft loans.

"We will maintain the debt ratio below 60 percent," he said, while adding that Indonesia's current debt ratio, for the 2005 state budget, was 57 percent of the GDP.

Anggito explained that to stay under 60 percent, the government would prioritize grants and carefully consider the soft loans offered.