Rendi A. Witular, Jakarta – Debate over the need to request a delay on the payment of government debts, both interest and principal, from overseas creditors is unlikely to ease anytime soon, with some senior lawmakers pledging to push ahead for the facility at all costs.
Vice President Jusuf Kalla now supports the proposal, saying a debt rescheduling would be needed if the state budget was deemed insufficient to service the payments, at a time when the country is in dire need of financing to stimulate the slowing economy.
With such support, it will not be impossible for the government and the legislators to sit together and seek a rescheduling this year by revising this year's state budget. Such a revision is usually made regularly in July, after first-semester fiscal assessments have been completed.
"Debt rescheduling is a common facility for a company or even a country. If there is too much burden on our state budget, I think we could arrange that (the rescheduling). Such a facility is not a bad one," said Kalla, who is also leader of the powerful Golkar Party, which controls the largest number of seats in the House of Representatives.
Indeed, the government will face a challenge in managing the fiscal situation this year due to the impact of the 2005 economic slowdown, which is estimated to continue through the first semester of 2006.
As the country is still struggling with rising costs caused by the increases in fuel prices in October and their multiplier effects, tax receipts, which account for more than 75 percent of government revenue, will most likely fall short of the 2006 budget forecast.
Under the budget, revenue from tax is set at Rp 416.3 trillion, or 13.7 percent of gross domestic product (GDP).
At the same time, the government will have to pay Rp 73.47 trillion (US$7.49 billion) in interest and Rp 60.38 trillion in principal – all of which is due this year.
The payments account for 21 percent of government expenditures this year, far higher than the 2.7 percent of the budget allocated for capital spending – a crucial allocation to help stimulate the economy.
The debate on debt rescheduling began weeks ago after Kalla's fellow Golkar Party member, State Minister of National Development Planning Paskah Suzetta, said the government should propose a delay in the payment of debts.
Paskah, a former chairman for the House of Representatives's financial commission, argued that rescheduling would help the country allocate more resources to finance infrastructure projects and provide incentives for the business community in order to spur higher economic growth.
Deputy chairman of the House's financial commission, Max Moein, said the commission would fully support Paskah's proposal since it had already recommended the Ministry of Finance explore such a facility during a hearing last September.
"We are supporting Paskah's proposal. Our first hearing with Minister of Finance Sri Mulyani will be focused largely on this issue," said Max, who is from the Indonesia Democratic Party of Struggle (PDI-P).
Max could understand the opposition for the proposal – also supported by Coordinating Minister for the Economy Boediono and Sri Mulyani – since the country was no longer entitled to any debt rescheduling from the Paris Club since it ended its special arrangement with the International Monetary Fund (IMF) in January 2004.
"What the government needs is a good negotiating team to present the proposal. I know it will be hard, but there is no damage in trying," said Max.
Indonesia, Southeast Asia's largest economy, has around $133 billion in domestic and overseas debts, with around $30 billion from the Japanese government alone.
Some legislators are currently gearing up to attack the government, particularly Sri Mulyani, who they perceive as "a stout supporter of IMF", unless there are serious efforts in pushing for the rescheduling.
Before becoming minister, Mulyani was a former IMF executive based in Washington.
"The government should not think under the IMF framework, as several ministers close to that agency do. We will oppose any efforts trying to financially invade our country," warned Commission XI member Rama Pratama of the Prosperous Justice Party (PKS).