Tsunami-hit areas get lion's share of debt moratorium

The Jakarta Post, Jakarta

Tsunami-stricken Nanggroe Aceh Darussalam will receive almost a third of the debt moratorium that the Paris Club group of creditor countries granted to Indonesia as part of their assistance after the disaster.

In the 2005 state budget revision that the government and the House Budget Commission has agreed upon, Aceh province will get up to Rp 8.79 trillion (some US$925 million) of the moratorium funds that were derived from postponed debt principal repayments that Indonesia should have paid this year.

Another Rp 3.56 trillion -- from a moratorium on debt interest payments -- will be set aside as reserve funds for the regions.

In addition, Aceh province will receive Rp 3.86 trillion in donor grants and Rp 619 billion in donor loan reallocations, bringing this year's total budget allocation for rebuilding the province to Rp 13.26 trillion.

The government and the Commission had agreed that funds from the debt moratorium would amount to Rp 16.86 trillion from debt principal, and Rp 10.78 trillion from debt interest.

Apart for Aceh, the government will allocate Rp 2 trillion from the moratorium to help plug the budget deficit, Rp 3.25 trillion to anticipate increased foreign debt payments due to changes in the rupiah exchange rate, and Rp 13 trillion as state reserves.

The Paris Club -- a grouping of the country's major foreign donors -- had provided a total debt moratorium of some $2.4 billion to Indonesia, with Japan contributing $1.578 billion, Germany $274.2 million, the United States $185 million, France $163.7 million, and the Britain $132 million.

The moratorium exempts Indonesia from having to pay any debt principal and interest installments for a year. It will be repaid within five years, after a grace period of one year.

On whether interest would still be charged on the postponed debts, this would be determined through bilateral negotiations between the government and creditor countries.

Japan has officially stated that it will still charge 1.3 percent interest on the postponed debts as its constitution forbids it from giving debt relief. France and Britain, meanwhile, have previously expressed their intention to not charge interest for the moratorium period.

Commenting on the debt moratorium allocation for Aceh, economist Faisal Basri said such figures were reasonable.

"Any allocation larger than that already allocated will be difficult to absorb, as this means that there will effectively be only four months to implement any rehabilitation and reconstruction projects," he said, brushing aside concerns that the government was robbing Aceh of international donor funds it should have received.

"What is important now is that the government ensures its commitment to provide every year funds that the Acehnese people need to rebuild their province," he said. The government has estimated that rebuilding Aceh would need a total of Rp 41 trillion over the next five years.

Faisal also agreed with the government's prudential measures in reserving a part of the debt moratorium for better fiscal management, as a debt moratorium only means shifting debt burdens into the future.