Indonesia: more concessions sought from Paris Club



25^th October, 2001.

The government is to meet with the Paris Club of creditor nations on Nov. 10 and Nov. 11 to seek the rescheduling of some Rp 27 trillion (US$2.7 billion) in sovereign debt, both principal and interest, to help ease the burden of the 2002 state budget, said the deputy for international affairs at the office of the coordinating minister for the economy Syafruddin Temenggung.

He added that the government was also scheduled to meet with the Consultative Group on Indonesia (CGI) on Nov. 7 and Nov. 8 in Jakarta to seek some Rp 35.4 trillion in loans to help plug the 2002 state budget deficit.

Syafruddin was quoted by Antara on Wednesday as saying that both Coordinating Minister for the Economy Dorodjatun Kuntjoro-Jakti and Minister of Finance Boediono would lead the Indonesian delegation at the meeting in Paris.

He said that the government had engaged in intensive discussions with several Paris Club members, including Japan.

Boediono said late on Tuesday that the government was seeking to reschedule some Rp 20 trillion in debt principal and Rp 7 trillion in interest payments to help next year's state budget.

Indonesia has never requested the rescheduling of interest in the past. Last year, the Paris Club granted Indonesia a rescheduling facility of some US$5.8 billion, but only for debt principal.

With such a huge foreign debt payment requirement next year, seeking the rescheduling of both principal and interest is unavoidable to help maintain the budget deficit at a manageable level of around 2.5 percent of gross domestic product.

The International Monetary Fund's Jakarta representative, David Nellor, said on Tuesday that it was possible for Indonesia to obtain the rescheduling of interest on top of the principal rescheduling.

Several economists, however, fear that the move could downgrade the country's sovereign rating and create new pressure on the rupiah.