Jakarta – Indonesia has begun rescheduling repayment of its public debt, its top finance minister said Tuesday, as bankers and business confirmed it had failed to meet repayments for the first time in its history.

On at least three payments, the central Bank Indonesia managed to cover the interest due by Monday's deadline but not repayments on the principal, said a French banking source directly involved in the transactions.

The central bank told banks involved, who were not given any advance warning, it had received a letter from Finance and Economics Minister Ginanjar Kartasasmita instructing it to only make partial repayments.

"We have started to reschedule our sovereign debt," Ginanjar confirmed late Tuesday. "We were informed by the IMF, and when we visited the Paris Club, we were informed we could start (debt rescheduling) immediately, by the end of July," he told AFX-Asia, an AFP-affiliated financial news service.

The top finance minister confirmed he would go to Paris next month to work out the modalities and procedures governing the rescheduling. "It is not a new matter and it is something which has been agreed upon with international financial institutions," he said, adding: "It is a known factor already incorporated in the budget passed a few weeks ago."

A European economic analyst said: "The Indonesian government seems to have anticipated the results of the negotiations on re-scheduling its public debt and has decided to go ahead unilaterally." A European banking source said that as far as his bank is concerned, nothing final has been reached with regard to the rescheduling.

He said the loan in question was granted to the finance ministry by a consortium of three banks, at least one of which was French. "Let's say it's a half-truth," the source said of Ginandjar's comments. "But we were not told in advance. They [the Indonesian government] have gone ahead of schedule – the mechanisms were to be confirmed later," he said.

Ginanjar said in July that Indonesia would not be able much longer to meet its repayment deadlines and added it had won the agreement of several creditors to reschedule its public debt. One of the possibilities raised was for Indonesia freezing capital repayments while still meeting the interest.

The first hints Indonesia was seeking to renegotiate its public debt, which it had scrupulously honoured, came at the end of February.

Banking and diplomatic sources said Jakarta made the first overture to Germany during the visit by its finance minister, Theo Waigel. The new Indonesian President, B.J. Habibe, who at the time was the chosen deputy to then president Suharto, personally pleaded Indonesia's case, verbally and in writing, to the German minister, the sources said.

The possibility of renogotiating Indonesia's debt was explored at a high level in conversations in Jakarta with the ambassadors of the Group of Seven industrialised nations – the United States, Japan, Germany, France, Britain, Italy and Canada.

It was the first time the Indonesian government, grappling with an financial crisis which has brought the economy to its knees, has defaulted on an installment on its national debt estimated by banking sources at 35 to 39 billion dollars.

Indonesia's private sector debt has climbed to more than 80 billion dollars as the country suffers its worst economic crisis in decades. The collapse of the rupiah which lost nearly 80 percent of its value against the dollar in a year has made it impossible for Indonesia to pay its debts as the country has become technically bankrupt.

The International Monetary Fund has put together a 46-billion-dollar rescue package to help bail out the stricken country, where more than 40 percent of the population already live below the poverty line set at just four dollars a month per person.

Despite the crisis, Indonesian officials have several times said they would not apply to the informal Paris Club of creditor nations which studies the situation of a country no longer able to meet its obligations. The Paris Club ensures the state involved can no longer negotiate its public debt bilaterally and guarantees that all creditors are treated on an equal footing.

To apply to the club is an official admission by a government that it can no longer honour its financial commitments, something which would be considered as a "humiliation" by Indonesia, once considered one of the Asian tigers and a model of economic development.