Thu, Jan 13, 2005 - Page 5 News List

Paris Club set to freeze repayment of debts


The Paris Club, an informal creditor group of the world's 19 wealthiest nations, is set to agree on freezing debt repayments for tsunami-hit Indonesia, Sri Lanka and the Seychelles, French Finance Minister Herve Gaymard said yesterday.

Indonesia, Sri Lanka and the Seychelles "will be the three countries I think which will accept this proposition," Gaymard told French radio RFI.

The other countries struck by the Dec. 26 earthquake and tidal wave have "a lower level of indebtedness than the others and do not want their credit rating to be downgraded on the international financial markets," he explained, citing particularly the case of Malaysia and Thailand.

The Paris Club was meeting in the French capital Wednesday to discuss the situation.

Many members have already called for the immediate suspension of payments by tsunami-struck states that have requested such relief, making an agreement almost certain.

More substantial longer-term measures were also under consideration at the closed-door meeting. A news conference was scheduled at 6:30pm.

India and Thailand have indicated they would not seek repayment suspensions since concomittant conditions could make it harder or more expensive to obtain credit on international financial markets.

The credit rating agency Fitch has warned that countries benefitting from a debt repayment freeze might face problems when it expired since they would then have to make regular payments in addition to the deferred ones.

Fitch said in a statement Monday that "deferring external debt service for an as yet unspecified period could lead to an unintended bunching of repayments and more generalised debt service difficulties at a later date."

Indonesia, however, has a lot riding on obtaining debt relief. Its foreign debt comes to around US$132 billion, and the country is looking at US$3 billion in payments this year to service that debt.

Foreign Minister Hasan Wirayuda, in Paris for the meeting, earlier told a joint news conference in London with British Foreign Secretary Jack Straw that Indonesia sought "any schemes that would allow us operating space."

On Tuesday, French Foreign Minister Michel Barnier said Paris was prepared to offer debt relief in the amount of 130 million euros if Jakarta would "consecrate that sum to reconstruction efforts."

Sri Lanka's foreign debt is roughly US$7.7 billion.

The Paris Club has said that freezing repayments could be just the first stage in aiding countries slammed on Dec. 26 by an earthquake and subsequent tsunamis that killed at least 157,000 people.

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