Indonesia urges debt flexibility

President Megawati wants a more flexible approach from the IMF

Indonesian economic growth slowed in the three months to June, raising fresh concerns over country's hefty debts.

Official figures show that the economy grew at an annual rate of 4.3% in the second quarter, down from 5% in the three months to March.

The figure for the second quarter also fell short of the 4.8% growth rate pencilled in by forecasters.

Consumer spending, fuelled by low interest rates, accounted for most of the expansion.

But the slowdown has thrown the spotlight again on Indonesia's $150bn (£81bn) debt burden, equivalent to about 65% of gross domestic product.

Credit costs

Indonesia needs to maintain high growth rates in order to keep up debt repayments without compromising spending on welfare programmes and investment on infrastructure.

The IMF should be willing to help initiate rescheduling of our debt Megawati Sukarnoputri

Upgrading the country's transport and communications networks is seen as essential to modernising the economy.

The government is due to set aside some $14bn in repayments in 2004, roughly half its projected tax revenues for the year.

Indonesian president Megawati Sukarnoputri said in her annual state of the nation address on Monday that "wrong recommendations" by the International Monetary Fund were partly to blame for the country's failure to curb its debts.

Without elaborating on the IMF's alleged errors, she called on the international lender to help it secure more flexible repayment arrangements.

"The IMF should be willing to help initiate rescheduling of our debt so there will be more funds available for the welfare of our people," President Megawati said.

The IMF helped put together a $5.2bn rescue package to help Indonesia recover from the effects of the Asian financial crisis of 1997/98.