WB considering waiving debt-prepayment premium

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)