Mixed Feelings Over Paris Club Tsunami Offer
Date: 14-Mar-05
Country: SRI LANKA/INDONESIA
Author: Simon Gardner and Harry Suhartono
The Paris Club grouping of 19 rich nations has offered to freeze payments of nations pummelled around the Indian Ocean's rim until the end of 2005 and allow the deferred payments to be repaid over five years, with a one year grace period.
Just after December's tsunami, which left about 300,000 people dead or missing, France said it expected Indonesia, Sri Lanka and the Seychelles to take up a debt-freeze offer.
Sri Lanka, where tens of thousands of people are still living in tents more than two months after the disaster, is the only taker so far, while Indonesia said it would review the offer anyway. Thailand rejected the idea when it was first mooted.
And Sri Lanka, which reckons it will cost $1.8 billion to rebuild its own ravaged coastline and damaged infrastructure, plans to lobby the G8 nations to extend the moratorium for another two years.
"Of course, while we are very grateful for this decision, which will help us to tide over the immediate difficulty ... we would like to lobby with the G8 to extend this to even 2006 and 2007," Finance Minister Sarath Amunugama said in an interview.
"Our reconstruction programme as accepted by the World Bank and the IMF will take a minimum of three years, ... anything from three to five years," he added. "So we would very much like it if the Club could extend this."
Sri Lanka, where the tsunami killed around 40,000 people and washed away entire coastal towns, owes the Paris Club around $4.6 billion in debt stock and interest -- which is approaching half of its overall multilateral and bilateral debt pile.
MORATORIUM TOO SHORT?
"I think definitely it could be much longer... the overall (reconstruction) plan is over three years," said Hasitha Premaratne, an economist at HNB Stockbrokers in Colombo.
"Relief for 2005 is a positive sign, but for 2006 and 2007 I would keep my fingers crossed, because it is unlikely they would grant that," he added.
Indonesia, the country worst hit by the tsunami, owes about $48 billion to Paris Club out of a total of around $272 billion worth of external debt held by tsunami-affected countries.
"I think we are going to look at it again, but from a cash flow point of view it would be very hard on us. It would only increase our burden," Mulia Nasution, a director general at Indonesia's finance ministry, told Reuters.
"It would not do much help for us," he added.
Indonesia's planning minister, Sri Mulyani Indrawati, said on Thursday rebuilding the country's tsunami-hit area would cost up to 10 trillion rupiah ($1.1 billion) in 2005 and 40-45 trillion rupiah over the next five years.
Australia, which sent around 1,000 military personnel to neighbouring Indonesia as part of the aid effort, agreed to join other Paris Club creditors in the moratorium offer.
The United Nations says international donors have pledged more than $6 billion in humanitarian assistance to the tsunami-affected region.
Analysts had expected Sri Lanka to receive at least 35 percent of the total aid package, but the government says it has so far only received a fraction of the money pledged.
