RI's foreign lenders to meet on debt terms

RI's foreign lenders to meet on debt terms

PARIS (Bloomberg): Indonesian government officials will meet
with the country's foreign creditors on Wednesday to ease terms
for repaying billions of dollars in debt, a crucial step toward
putting Indonesia's economy back on track.

The U.S., Japan and other lenders will set terms for
rescheduling up to $6 billion in debt that matures over the next
three years, about $2.2 billion of which falls due this year,
according to International Monetary Fund officials. Failure to
secure new repayment terms could cause Indonesia's currency and
stock market to slide on concern about a possible default.

The IMF, meanwhile, will decide this week when to send a
review team to Indonesia, a prerequisite for making its next $400
million loan payment to the country. The Washington-based lender
already delayed the payment, originally scheduled for this month,
because Indonesia failed to meet a deadline for economic reforms.

"We're hopeful that the discussions will be completed" and
produce an agreement on debt rescheduling, said John Dodsworth,
the IMF's senior representative in Jakarta. The Paris meeting is
due to end late today.

An accord with the so-called "Paris Club" of creditors could
boost flagging bank lending and foreign investment and give
Indonesia more room to refinance its other debts. It could also
help the government reach its target of 4 percent economic growth
this year, after zero growth last year and a 13.2 percent
contraction in 1998.

"It's important not only to secure the next IMF tranche but
also to bolster foreign direct investment inflows," said Anthony
Nafte, an economist with Credit Lyonnais Securities Asia Ltd.
"Potential foreign investors need the reassurance that the legal
and financial institutions are being strengthened."

Approvals for foreign investment in Indonesia fell 74 percent
in January from the previous month as political and social
instability kept investors away.

Indonesia sank into its deepest recession in decades as the
Asian financial crisis of 1997 and 1998 caused the rupiah to lose
two-thirds of its value and sent interest rates soaring.

As other crisis-hit Asian countries return to growth,
Indonesia -- whose sovereign debt is equal to its entire economy
-- still lags behind. Saddled with a budget deficit of $6
billion, the country needs its creditors to extend the deadline
for repaying its debts, which will reach $162 billion by year-
end.

Today's meeting between Indonesia and its creditors will be
the first since 1998. At the last meeting, the lenders agreed to
reschedule $4.2 billion in debt, extending the repayment period
to 20 years.

Japan, Indonesia's largest sovereign creditor, can't
reschedule debt under its own laws. Instead, it's likely to
extend new credit to Indonesia to pay off outstanding loans, as
it did in 1998.

Indonesian Finance Minister Bambang Sudibyo, who is attending
the Paris meeting, said last week the government would be able to
implement "most of the measures" the IMF is demanding as a
condition for the loan payment.

State Enterprises Minister Laksamana Sukardi said last week
that Indonesia has now met all IMF requirements on the
rescheduling of $81 billion owed by Indonesian companies, one of
the key sticking points with the IMF.

The Indonesian Bank Restructuring Agency said on Monday it has
met most of its IMF obligations, including filing bankruptcy
cases against four companies and transferring bad debt from PT
Bank Mandiri. IBRA also said it plans to sell about a third of PT
Bank Central Asia in an initial share sale.

The $400 million IMF payment is part of the lender's $5
billion bailout fund for Indonesia for the next three years.

Investors see the IMF payment as crucial to Indonesia's
recovery. The rupiah lost 3.5 percent of its value against the
U.S. dollar after the lender said last month it would postpone
the payment.