Jakarta – Indonesia's currency and stock market were higher in early trading Monday after the Paris Club's agreement to reschedule 5.4 billion dollars in government debt.
The rupiah breached the 9,500 to the dollar level for the first time since late last year, and share prices were also sharply higher. At 10.05 am (0305 GMT) the composite index was up 8.695 points or 1.6 percent at 547.965.
After two days of talks, foreign government creditors agreed on Friday to reschedule 5.4 billion dollars comprising both principal and interest and falling due between April this year and December next year. The deal reduces Indonesia's debt burden to a maximum of 2.7 billion dollars from 7.5 billion over the period.
Development aid loans will be repaid over 20 years with a 10-year grace period, and commercial credits over 18 years with a five-year grace period.
Indonesia has total public debts of around 136 billion dollars, almost equivalent to its gross domestic product. The sum includes some 66 billion dollars in domestic debt, arising mainly from a huge bailout of the financial sector after the regional financial crisis of 1997-1998.
One economist described the deal as the best that could have hoped for and said it should be positive for investor sentiment.
Danareksa Securities economist Raden Pardede said Indonesia could not have got a longer rescheduling as 20 years is the maximum permissible. "As a civilised country we must honour the rules of the game. Indonesia is not Nigeria or other African countries which are entitled to get debt haircuts," he told AFX-Asia, an AFP-owned financial newswire.
But the International NGO Forum on Indonesia Development (INFID) said the deal was not a comprehensive or long-lasting solution. It said in a statement that much of Indonesia's debt is "odious and illegitimate in nature" since it was accrued under former dictator Suharto.
With half of Indonesia's people living on the poverty line of one dollar a day, INFID said, creditors were ignoring social obligations. The group urged the Indonesian government to abandon the "unfair mechanism of the Paris Club" and to invite all creditors to a "comprehensive and impartial assessment of the current debt and to seek a sustainable and just solution." It did not spell out what it had in mind.