The 'futile' Paris Club

The 'futile' Paris Club

The Paris Club way of debt settlement does not work. It only
covers up the core issue of debt for a while, without solving it.
The government's debts will just create a problem after the
specified 20-year-period of delay is over.

The government should 'push' creditors harder into granting
more debt relief. It is necessary because, technically, the
nation can no longer afford to repay its debts.

Roughly speaking, the government this year has to repay
external debts worth around US$6 billion, assuming that it
secures debt rescheduling from Paris Club III.

Therefore, no more new debts should be incurred, for example,
by giving tax pardons to taxpayers in order to increase their
compliance in paying tax.

Some observers suggest that the bill on state bonds currently
being discussed by the government and the House include articles
limiting foreign debt repayment, e.g. to 10 percent of state
revenue.

Several circles have also proposed that creditors write off
Indonesia's debts or at least provide debt relief, rather than
mere debt rescheduling. Indonesia deserves such relief because it
already belongs to the category of poor countries with annual per
capita income of about $300, far lower than the average $800 for
the group.

The debt cut or write-off is deemed proper as donor
institutions like the World Bank have failed to take firm action
when they were aware of corruption of their funds by recipient
officials, so they should also be held responsible.

The German model of debt settlement should serve as an
example. It provides debt relief through compensation made by
Indonesia's efforts at conserving its environment. There are in
fact various ways of settling national debts other than the
conventional pattern.

-- Bisnis Indonesia, Jakarta