RI to pursue bilateral debt talks

Dadan Wijaksana and Rendi A. Witular, The Jakarta Post/Jakarta

The government is looking for help from the International Monetary Fund (IMF) to facilitate bilateral talks with foreign creditors on debt-rescheduling issues, but separate from the Paris Club rescheduling facility that has been used in recent years.

"We have rescheduled our debts three times (under the Paris Club agreements) with our foreign lenders using the IMF as an umbrella, because the creditors themselves are IMF members.

"What we have to do now is use that umbrella from the IMF to seek bilateral deals," Coordinating Minister for the Economy Dorodjatun Kuntjoro-Jakti said on the sidelines of a business forum on Wednesday.

The Paris Club was a group of Indonesia's creditor nations, which could negotiate for and reschedule debts, both principal and interest. It has been used in order to ease the country's huge burden of servicing foreign debt, which currently stands at more than US$65 billion.

As the creditors were only willing to do so with a country undergoing IMF programs, the forum was terminated in 2003 after Indonesia completed its five-year program with the IMF. Indonesia rescheduled a total of $15.5 billion worth of debts under that forum.

However, confusion reigned on Monday when President Megawati Soekarnoputri announced in a speech that the "IMF made mistakes" in some of its solutions to cope with the impact of the 1997-1998 economic crisis, and should therefore make amends by "helping to alleviate the burden of our debts that accumulated as a result of mistakes from those (IMF) recommendations."

"At the very least, the IMF should be willing to initiate the rescheduling of our debts so that a greater amount of money is available for the development of the welfare of our people," she said, without elaborating on the mistakes.

The remarks spurred speculation that Indonesia was seeking the Paris Club-style debt rescheduling mechanism, something that is likely not feasible since the country is no longer under an IMF special loan program.

Dorodjatun's statements should confirm otherwise, meaning that Indonesia would continue to pursue its government-to-government talks with creditor nations -- something that the country has been doing for some time -- only not with the help of the IMF.

"There are plenty of things that we can come up with (under the bilateral talks), not just the rescheduling, but also a debt swap mechanism -- be it for the environment, education or health. And then there are also grants.

"If all of those are too difficult, we could try to get lower interest rates, so that we can reduce the burden on the budget," he said.

At present, payments for debt servicing, both the interest and principal, accounts for some 30 percent of the total central government expenditure.

Elsewhere, Dorodjatun said the importance of Megawati's speech and her reference to the IMF was an acknowledgment that the country had gained a lot from the presence of such institutions, but also a demand of sorts for them to rectify their mistakes.