RI, Paris Club agree on debt rescheduling

JAKARTA (JP): The Paris Club creditor nations agreed on Wednesday to reschedule US$4.2 billion in principal payments of Indonesia's sovereign debt to allow the country to focus on financing its economic reform programs and help the poor weather the acute crisis.

Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita said in a statement that the agreement with 19 creditor nations provided the government with a generous 20-month consolidation period.

The statement, issued here after two days of negotiations in Paris, said principal payments on soft loans would be repaid over 20 years with a five-year grace period, and over 11 years on export credits with a three-year grace period.

The accord, it added, rescheduled $500 million in soft loan principal payment and $1.2 billion in export credit repayment due from Aug. 6 to the end of March next year.

The agreement also reschedules $700 million in soft loan repayment and $1.8 billion in export credit repayment due in the 1999/2000 fiscal year ending in March 2000.

Minister of Finance Bambang Subianto briefed President B.J. Habibie on Wednesday on the accord with the creditors.

"The President was happy with the outcome of the debt negotiation, saying it will greatly ease the burden of our State Budget," Bambang told reporters.

Ginandjar led the Indonesian delegation at the negotiations which included State Minister for Development Planning Budiono, economic adviser Widjojo Nitisastro, Bank Indonesia director Dono Iskandar Djojosubroto and chairman of the Capital Market Supervisory Agency Jusuf Anwar.

Ginandjar told a news conference in Paris on Wednesday that Indonesia would start talks soon on the rescheduling of debt owed to commercial banks under the London Club.

The so-called London Club is an informal body that brings together commercial banks to discuss rescheduling mechanism of distressed debt. It normally meets once the Paris Club has reached an agreement, and rescheduling terms are usually the same.

The commercial bank talks will cover payments totaling $263 million and the deal will be on comparable terms to that reached with the Paris Club, Ginandjar was quoted by Reuters as saying.

International Monetary Fund Asia Pacific director Hubert Neiss said the country's government commercial debt totaled $2.26 billion, comprising $426 million in outstanding bonds and $1.84 billion in syndicated loans.

Paris Club Chairman Francis Mayer said at the same news conference that the commercial bank deal would be comparable to the Paris Club because it was the custom to maintain a principle that all creditors be treated equally.

Indonesia has $134 billion in external debt owed by both the private and government sectors.

About $80 billion is owed by private sector companies. Of the $54 billion in government and public sector company debts, $52 billion is owed to sovereign creditors.

Ginandjar also said that although the Japanese government didn't roll over its loans to Indonesia maturing during the current fiscal year ending March 1999, it would provide new untied loans with the same amount.

Japanese Minister of International Trade and Industry Kaoru Yosano said here on Monday that Japan would provide 1.3 billion in new loans to Indonesia for refinancing purposes.

Ginandjar said either rescheduling, refinancing or providing new untied loans would be chosen for Japanese loans maturing in the next fiscal year.

"As a conclusion, due to the current world economic and financial conditions, the results of the negotiation are very good, and according to the chairman of the Paris Club and several participants, the results are one of the best," he said.

He said the 20-month consolidation period provided by the creditors would be a major reprieve for the country because it could function as overseas aid which would still be essential to help finance the next fiscal year's State Budget.

The country's worst economic crisis in three decades has contributed to the rupiah losing more than 80 percent of its value against the U.S. dollar.

In order to limit the detrimental impact of the crisis on the poor and the unemployed, the budgetary cost of social safety net programs under the IMF supported scheme is estimated at 7.5 percent of gross domestic product. The cost for restructuring and recapitalizing the ailing banking sector is equivalent to 1.6 percent of GDP, resulting in a massive 1998/1999 budget deficit of about 8.5 percent of GDP.

International donor countries and institutions have pledged to provide about $14 billion to plug the budget gap. This is part of about $43 billion in balance of payments loans which was organized by the IMF for three years starting late last year.

"I have noted that our financing gap will shrink next fiscal year. However, it will still be significant ... so we need to reschedule eligible principal payments," Ginandjar said in his opening speech at the Paris meeting.

"This temporary relief in debt service payments will help us on our way to recovery." (rei)