WB, Australia to review Indonesian debt

WB, Australia to review Indonesian debt

CANBERRA (Reuters): Australia said on Tuesday it was
undertaking a joint study with the World Bank of the make up and
management of Indonesia's foreign debt to see whether the
international community could ease the massive burden.

"We and the World Bank... are now going to put together a
joint study on the structure of that debt and whether anything
can be done about it internationally," Australian Foreign
Minister Alexander Downer told reporters.

He said the joint study was agreed upon during a visit to
Australia last week by World Bank President James Wolfensohn.

"That's on a no-commitments basis. We have no idea what could
be done about it, but we need to understand the structure of
Indonesian foreign debt because (it is) a big problem for
Indonesia as they struggle to get out of the economic crisis that
has engulfed the country off and on since 1997," Downer added.

The Washington-based World Bank is one of Indonesia's largest
creditors, along with the International Monetary Fund and Paris
Club of creditors.

Downer said the study would investigate how much in loans was
pilfered by corrupt officials and see whether adjustments to
payment schedules -- over and above that already agreed to by the
Paris Club -- can ease the burden on Indonesia's new President
Megawati Soekarnoputri.

Australian Prime Minister John Howard is scheduled to go to
Jakarta on August 12-13 to meet Megawati, who replaced former
president Abdurrahman Wahid last month after Wahid was ousted
from power for incompetence after a chaotic 21-month rule.

Aid agencies and some creditors have said the international
lenders should consider forgiving some of Indonesia's $30 billion
aid debt, a third of which the World Bank has said was stolen by
the regime of former president Suharto.

An agreement by the official Paris Club in April last year to
reschedule $5.8 billion of Indonesia's debt is contingent on an
active IMF program.

The IMF froze a $400 million tranche of its $5 billion loan
program to Indonesia in December because of failed economic
reforms. A resolution to the impasse would pave the way for
rescheduling billions of dollars of debt with the Paris Club.

"When we know more about the structure of it, we'll know if
there is anything that can be done about it over and above what's
already been done through the Paris Club," Downer said.

"There is some argument about the debts that were run up by
President Suharto in his time and the nature of those debts and
the servicing of those loans and the consequences for the
Indonesian government," he added.

The World Bank in June approved new loans of $422 million for
Indonesia and said it could increase lending to as much as $1
billion annually if the impasse with the IMF over the slow pace
of economic reforms in Indonesia could be resolved.

An Indonesian senior government official said on Monday that a
team from the IMF is slated to meet Indonesia's new government
later this month to discuss the country's progress in meeting
economic reform targets.

The IMF team will hold talks with the new economic ministers,
and are also likely to meet Megawati, said Dipo Alam, assistant
to the coordinating minister for the economy.

"I think they will arrive here sometime in mid-August," he
said, adding that IMF Asia Pacific deputy director Anoop Singh
would be leading the team again.

An IMF team left Jakarta last month with only a draft of the
Letter of Intent (LoI) containing the new reform targets.

The fund suspended the $400 million loan to Indonesia in
December last year after the country backpedaled on a number of
LoI targets.