RI to pursue bilateral debt talks

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.