RI, Paris Club agree on debt rescheduling

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)