RI to extend debt, interest payments

RI to extend debt, interest payments

Bloomberg, Jakarta

Indonesia said it is studying a plan to extend some debt and
interest payment schedules, part of a strategy to use funds for
projects that will boost the economy.

"We are planning to discuss this with a number of overseas
creditors, probably through the Paris Club," State Minister of
National Development Planning Paskah Suzetta told reporters in
Jakarta on Tuesday. "We need to study this carefully so it won't
disturb investment or hurt market confidence."

Indonesia owes US$133 billion in domestic and overseas debts,
the central bank said last week. While the Paris Club of 19
creditor nations agreed in March to delay about $4.7 billion of
Indonesian debt due this year, rearranging more loans would be
difficult because Indonesia is not part of the International
Monetary Fund (IMF)'s aid plan, Standard Chartered economist
Fauzi Ichsan said.

The plan to use the Paris Club is "impossible" unless
Indonesia returns to the IMF's program, giving the creditor
nations a benchmark against which to judge the nation's
creditworthiness, Fauzi said in a telephone interview from
Bangkok.

The Paris Club deferred Indonesia's debt to help the nation
recover from the damage caused by the Dec. 26 tsunami, which left
more than 160,000 people dead or missing in Aceh and North
Sumatra provinces. The Club said then it won't seek repayments
this year from nations hurt by the tsunami. The deferred amounts
will be repaid over five years with the interest accrued in 2005
to be repaid at rates determined by the nations involved, the
Paris Club said then.

Indonesia was under a $5 billion aid package with the IMF from
1998 to 2003, during which the government had to present a
specific economic program called the letter of intent to the fund
as part of the loan agreement. The fund disbursed the loans in
stages at the time, depending on the progress of the specific
targets set in the letter of intent.

"Coming back to the IMF program is politically impossible,"
Fauzi said. "One possible way is to refinance the debt through
bond issuance. The government can sell the bonds then use the
proceeds to pay the debts."

Indonesia sold $1 billion of dollar-denominated bonds in April
and $1.5 billion in October to cover an estimated Rp 24.9
trillion (US$2.54 billion) deficit target estimated for this
year.

Indonesia's government in January said it didn't want to
suspend debt repayments because it may hurt the country's credit
ratings. Indonesia's overseas debt is rated B2, five levels below
investment grade, by Moody's. It is ranked B+, four steps less
than investment grade, by Standard & Poor's.