WB considering waiving debt-prepayment premium

JAKARTA (JP): The World Bank is considering waiving the premium for Indonesia's repayment of its debts to the bank ahead of schedule.

The new World Bank vice president for East Asia and the Pacific, Jean Michel Severino, said yesterday the bank welcomed any prepayment of debts from any country provided they paid the premium.

"The (Indonesian) government is asking for a waiver not to pay the prepayment premium, and this is under review as Indonesia is not the only country to be of the interest at this point," Severino said after meeting Minister of Finance Mar'ie Muhammad last night.

The prepayment premium is usually charged to any debtor which repays its debts ahead of schedule as compensation for unpaid interest.

Marie said earlier the government had paid US$2.6 billion of high-interest bearing foreign debt ahead of schedule since the 1994/1995 fiscal year, saving the government $1.45 billion in cumulative interest payments. Some of these were World Bank debts.

The government repaid its high-interest loans with budget surpluses and proceeds from the sale of government shares in state enterprises.

Last December the government proposed to settle its debts with interest rates of 8 percent or more to the World Bank and Asian Development Bank, using proceeds from the new sale of its shares in state-owned telecommunications firm PT Telkom on overseas markets.

Earlier yesterday Severino met President Soeharto. Severino was accompanied by the World Bank's managing director of operations to Indonesia, Gautam Kaji.

After meeting Soeharto, Kaji said the bank was still committed to continuing its support for Indonesia's development.

The bank is organizing the meeting of the Consultative Group for Indonesia (CGI) in Japan in July. The meeting will discuss further assistance to Indonesia.

"I think the purpose of the consultative group is essentially to try to see whether we can meet the need for Indonesia in terms of its development priority and funding needs," Kaji said.

"The bank has always been, shall I say, a significant contributor in that process. We expect to continue to do so," he said.

The CGI, comprising 17 countries plus financial institutions, pledged US$5.26 billion in soft-loan assistance to Indonesia last year compared with $5.35 billion in 1995. The World Bank's share last year was $1.2 billion, unchanged from the previous year. (rid)