RI seeks G20 help over debts

Mustaqim Adamrah and Aditya Suharmoko, THE JAKARTA POST, JAKARTA | Tue, 03/17/2009 10:42 AM

Indonesia has proposed to world’s big economies a kind of facility that will help companies extend their matured debts to cope with the global crisis.

Finance Minister Sri Mulyani Indrawati said Monday that Indonesia had conveyed the proposal during the recent G20 ministerial meeting of the biggest developed and emerging economies in London.

She said the facility should be provided by banks in Europe and the United States for the private sector, especially in emerging economies to weather the crisis.

Mulyani said the facilility would also help companies that were facing grave “rollover risk”, in which they could no longer obtain foreign-exchange denomination fresh loans from banks until they had paid their previous debts completely.

“Banks in the US and Europe are ailing. They’re no longer able to give new lending [to the private sector] because of high risk,” she said at the Presidential Palace.

“[Banks] will request that companies redeem their due debts before providing new ones. What we seek is an extension for the due debts or a new loan before existing debts mature.”

Under normal conditions, companies can easily get new loans after a period of time, even if their previous debts are not yet settled.

Mulyani said US Finance Secretary Timothy Geithner believed the US government was “strongly” committed to helping overcome this issue.

The meeting, she added, also discussed the need for multilateral institutions, including the Asian Development Bank (ADB), the World Bank and the International Monetary Fund (IMF) to get a capital boost in order to be able to channel more to countries in dire need of their funding.

She said the IMF had agreed to raise its lending capacity by two-fold to $500 billion, while the ADB planned to raise its capital by 200 percent to help inflate its lending by $15 billion.

Anggito Abimanyu, head of fiscal policy at the Finance Ministry, said Indonesia was likely to increase its financial stimulus next year in line with a request by the G20 countries to raise such allocation to a minimum of 2 percent of GDP.

“For this year, the stimulus figure is unlikely to change. Maybe next year we will adjust accordingly,” Anggito said. Indonesia has allocated Rp 73.3 trillion ($6.10 billion) in a stimulus package this year — equivalent to 1.4 percent of the GDP.

The United States has urged other G20 countries to allocate a stimulus equal to 2 percent of the GDP to help accelerate global economic recoveries. The G20 members are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the US, the UK and the European Union.

The recent ministerial meeting was aimed at crafting an agenda for their leaders, who will meet in London on April 2. The G20 will set out a dozen principles to be followed as members take concerted measures to avoid distortion in capital flows and spark protectionism.

According to the IMF and several other financial institutions, global economic growth is forecasted to contract by between negative 1.5 percent and 0.5 percent this year.