• Kyodo

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Japan has agreed in principle to reschedule $2.5 billion (312.5 billion yen) in credit to Indonesia on the eve of this week’s annual meeting of the Paris Club of major creditor nations, international financial sources said over the weekend.

“For the first time in 30 years, Japan, the biggest donor to Indonesia, accepted Jakarta’s request for debt rescheduling,” a source close to the negotiations told Kyodo News. “That is a significant step to lessen the repayment burden of Indonesia.”

According to official statistics, Indonesia’s external debts stood at more than $130 billion as of the end of last year, with a debt ratio of over 100 percent to gross domestic product. The government owes approximately $70 billion, and the rest is owed by the private sector.

Last April, the Paris Club agreed to reschedule $5.8 billion of Indonesian debts due in 2000 and 2001. Since then, Tokyo and Jakarta have been negotiating a bilateral rescheduling scheme, and a final agreement was reached March 23, the source said.

The credits that the Japanese government has agreed to reschedule are yen-denominated loans, rice import credits, untied loans by the former Export-Import Bank of Japan and trade insurance for provision before April in 1997, according to another source.

“(The negotiators) agreed to set a grace period of 20 years for official development assistance loans and of 15 years for non-ODA ones,” the source said.

“Japan will submit a memorandum of understanding with Indonesia to the Paris Club meeting this week to get

final approval from other creditors like the International Monetary Fund, the World Bank, the United States and major European countries,” he said.

Although the IMF continues to delay its disbursement of a $400 million slice of the $5 billion bailout package granted to Indonesia due to its slow implementation of economic reforms, the source said, “It is expected that IMF will explain to the members of Paris Club that Indonesia is going in the right direction.

“Therefore, they will agree to launch a debt-rescheduling plan officially with the participation of Japan from this year to prevent any further deterioration in the economic situation in Indonesia. That could be good news to restore the confidence of foreign investors in the country.”

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