Government Not to Ask for a Cut in Debt Repayment
Tuesday, 19 December, 2006 | 12:50 WIB

TEMPO Interactive, Jakarta: The government will not ask for a cut to creditors. However, the government is still committed to alleviating debts. One of the ways will be by accelerating main debt repayment earlier than due. “If the budget shows a surplus, we may accelerate debt repayments,” Director General of Debts Management told reporters after attending the signing of donation and debt swap program with Germany yesterday (12/18) in Jakarta.

He explained that the government wants to reduce the main amount of debts. However, the government will avoid public's negative perception should Indonesia ask for a cut. This issue could drop the government's credibility. As a result, either the government debt’s interest or yield becomes higher. “We avoid it,” he said.

So far, Indonesia has quite good credibility. Indonesia's rank, according to him, is improving: from B+ to BB-. The rank the Standard & Poor's gave showed that Indonesia has the ability of repaying debts. “We have never asked for a cut facility all this time, repayment delay, or even refused to pay it.”

In fact, he said, the government will be very selective in approving an offer of a debt swap from creditor countries. The government is prepared to convert debts with certain program for such matters as natural disasters. “In a normal situation, Indonesia will never do (the conversion),” he said. “We are very cautious because it is related with the terms and conditions as well as whether or not it is efficient for the state budget,” he added.

In regard to the debt swap, the government has once again provided relief of debt repayment from the German government at 20 million euro. The cash, initially used for repaying debts, will be utilized by the government to finance education in Indonesia.

It was the fourth debt conversion that Germany granted. First was the debt swap of 12.5 million euro for the educational program I; debt swap of 11.5 million euro for education II; debt swap of 12.5 million euro for helping small-, micro-, and medium-sized enterprises as well as developing environmental-friendly technology. So far, only Germany and Italy—two of Indonesia’s creditor countries —that are willing to trade their claims.

According to Hans Peter Mussig, Vice President of the German Development bank for Asia-Pacific Region, instead of automatic debt relief, it was conditional. One of the conditions was that the Indonesian government must send supplementary funds of 10 million euros to acquire the debt swap project.

Afterwards, the debt swap facility will be given after the project is finished and is stated legal by an independent external auditing institution. “After the debt swap, the total of debt swap to Germany will be of around 1.1 billion euro,” he said.

Agus Supriyanto, Anton Aprianto