The Indonesian government has welcomed a German plan to propose a debt moratorium for the tsunami-hit country when the Paris Club of sovereign lenders next meets on January 20th and hoped it would free up more funds for reconstruction.
The proposal came amid concerns over ballooning costs of reconstruction from the tsunami that killed over 45,000 people in Indonesia. The country is already saddled with public external debt equal to about a third of its gross domestic product.
"It is very positive," said Finance Minister Jusuf Anwar when asked about the debt proposal ahead of a cabinet meeting. "We will follow it up. We will give our response."
Indonesia's total external public debt stood at US$80.9 billion at the end of 2003. The amount owed to Paris Club sovereign creditors as of the end of last year was not immediately available.
But according to the Paris Club's Web site, which contains data from 2002, the Indonesian government's external debt totalled $75.9 billion, of which $41.5 billion was owed to the Paris Club.
German Chancellor Gerhard Schroeder said yesterday that Germany would propose a debt moratorium for tsunami-hit nations Indonesia and Somalia at the next Paris Club meeting.
US President George W. Bush said he would consider all requests for aid to affected countries, including the debt moratorium proposal.
Anwar said the move would help ease pressure on foreign debt servicing and thus free up more funds for reconstruction, estimated to cost in excess of 10 trillion rupiah ($1.0 billion) in the tsunami-hit areas of Sumatra island.
The 2004 state budget allocates some 70 trillion rupiah this year to service principal and interest on foreign debt, or a quarter of total domestic tax revenue. This is similar to the amount of funds slated for critical development spending.