RI seeks debt deal from Paris Club
RI seeks debt deal from Paris Club
JAKARTA (JP): Indonesia needs a further debt-rescheduling facility from the Paris Club of creditor nations to lift pressure from foreign debt payments in the 2002 state budget, new Coordinating Minister for the Economy Dorodjatun Kuntjoro-Jakti said on Friday.
Dorodjatun said Indonesia's budget next year would face difficulties without another Paris Club debt rescheduling deal.
"I always thought that the first and second Paris Club deals would be enough," he said.
"But I've noticed that it isn't that easy, so we are forced to consider doing further negotiations with the Paris Club," he said without elaborating.
Last year, the Paris Club of 19 government creditors agreed to reschedule US$5.8 billion of Indonesia's debt due to its maturity between April 2000 and March 2002.
Of the $5.8 billion in debts, $2.21 billion matured last year, $2.8 billion this year and another $717 million will mature in the first quarter of 2002.
In 1999, Indonesia inked its first Paris Club debt rescheduling deal worth $4.2 billion, which was due to mature by March 2000.
The Paris Club deals have allowed the government to allocate more funds to development spending and social needs.
The deals have also helped boost foreign creditors' confidence while releasing pressure on the rupiah.
However, a third deal will likely depend on how Indonesia conforms with the Paris Club's requirements for the current condition: meeting economic reform targets set under the International Monetary Fund (IMF) program.
Indonesia's foot-dragging on some of these reform targets last year prompted the IMF to suspend a $400 million loan tranche.
Consequently, the move annulled the rescheduling deal of $2.8 billion for this year until after the IMF resumes its lending.
The government is struggling to secure a Letter of Intent (LoI) from the IMF to unlock the fund's loans.
That would have to come prior to a September meeting of the club, which will be held to review the remaining debts until 2002.
Indonesia hopes to secure the LoI by the end of August or early September at the latest.
The Paris Club meeting is slated for September 10, said Dorodjatun.
He said he expected an IMF team to arrive in Jakarta after Indonesia's Independence Day on Aug. 17.
A senior government official said earlier that the IMF's planned visit was to meet Indonesia's new government, particularly its economics team.
Dorodjatun also added that he expected continued loan support from the Consultative Group on Indonesia (CGI) to help finance development spending in the 2002 state budget.
To this end, he said, the government must push ahead with drafting the 2002 state budget.
"The budget must be clean and convincing when we present it to the CGI," he said. The group will convene again in October.
Economists, however, have urged the government to cut its reliance on foreign debts, due to its pressure on the state budget.
The Brussels-based International Crisis Group (ICG) puts the Indonesian government's foreign debts, including those of state firms, at $84 billion.
In total, Indonesia's foreign and domestic debts amount to some $154 billion, which is equal to the country's gross domestic product, according to the ICG.
Dorodjatun said on Thursday that tackling Indonesia's massive foreign debts was among his key priorities.
"Our debt situation is the worst ever in the history of this republic," Dorodjatun said.
Earlier, American expert on Indonesia Jeffrey A. Winters said this year's spending on foreign debt servicing was six times higher than that for education, social and health care needs.
"It is the poor that suffers the most from this situation," he said.
Moreover, Winters said, Indonesia continued paying what he called illegitimate foreign debts totaling some $30 billion.
He said the $30 billion made up 30 percent of the foreign debts that fell victim to corruption under the regime of former president Soeharto.
He suggested that Indonesia ask for a suspension of payments on the illegitimate foreign debts, saying it was unfair creditors demanded their loans be paid back in full with interest.
He said Indonesia was in a strong legal position to ask creditors for a debt moratorium before an international court.
World Bank officials have privately acknowledged the loan abuse in the past.
On Tuesday, Australian Foreign Minister Alexander Downer said his country and the World Bank would investigate the loan abuse under a joint study to ease Indonesia's debt payments.
"We and the World Bank are now going to put together a joint study on the structure of that debt and whether anything can be done about it internationally," he said.
He made no comments on the possibility of a debt moratorium or haircut on Indonesia's alleged illegitimate debts.
New Minister of National Development Planning Kwik Kian Gie said it was unlikely that Indonesia would ask for a debt haircut.
"I've tried it before, and they (creditors) told me not to even mention it (a debt haircut). Debt rescheduling is enough," he said.
Pushing ahead with demands for a debt haircut risked isolation from international creditors, he warned.(bkm)