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Creditors Consider Debt Freeze
Thursday, January 06, 2005
JAKARTA, Indonesia — Rich nations at an international conference on aiding Asian tsunami (search) victims were considering Thursday whether to freeze some debt owed by poor countries shattered by the disaster.
A draft of a declaration being negotiated by leaders at the conference in the Indonesian capital, Jakarta (search), welcomed proposals to reduce tsunami-hit nations' debt "to augment their national capacity to carry out the rehabilitation and reconstruction efforts."
Several European nations back postponing repayments by some of the 11 countries where a massive earthquake and the tsunami it triggered killed at least 140,000 people on Dec. 26.
Others are more wary of that strategy, saying direct payments are a more effective way to reach the stricken.
Australia, which Wednesday announced d$764 million in grants and loans to aid tsunami victims in worst-affected Indonesia, has said it is unimpressed by a debt moratorium plan backed by Canada, Britain, France, Germany and others.
"Our view is that Indonesia is likely to benefit substantially more by direct and active programs," Australian Foreign Minister Alexander Downer (search) said.
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He noted that debt moratoriums are eventually lifted while aid grants don't have to be repaid. Aid can more easily be targeted to those in need than debt relief, which puts money into governments' general coffers.
He said Australia would discuss the debt moratorium idea with other members of the Paris Club of creditor nations.
World Bank President James Wolfensohn said creditors could ensure the proceeds of debt relief go to those who need help but said it was easier to control and monitor specially earmarked grant money.
Global aid pledges total about $4 billion.
Japanese Foreign Ministry spokesman Akira Chiba said his country, a major aid donor which holds $20 billion in Indonesian debt alone, backed a freeze on repayments.
"I see no choice between debt relief or aid," he said. "Concerning loans, we are considering a moratorium and for grant aid ... we are ready to provide $500 million for emergency assistance."
He said he did not expect an immediate resolution of debate on debt but thought conference delegates might begin to work toward a resolution.
The World Bank says that among the tsunami-hit nations, Indonesia and India have the biggest foreign debts. Indonesia owed $132 billion and India $104 billion in 2002, the last year for which figures were available, it says.
The bank said other levels were: Thailand, $59 billion; Sri Lanka, $10 billion; Malaysia, $48 billion; Somalia, $2.7 billion; and the Maldives, $270 million.
U.N. Secretary General Kofi Annan took no stance on whether debt freezes would be helpful.
"What is important is that the international community does whatever it can to assist the governments in the affected countries," he said. "The issue of debt relief ... is very much on the table and I will wait to see what the countries concerned, the creditor countries, decide."
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