RI hopes for debt payment suspension by Paris Club

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.