Indonesia vows to repay IMF debts

Indonesia says its economy is strong enough to cope

Indonesia has vowed to repay all of its debts to the International Monetary Fund (IMF) by the end of 2008 despite being hit by a deadly earthquake.

Bank Indonesia governor Burhanuddin Abdullah said the country would pay half of its $7.87bn (£4.2bn) debt this year and the rest next year.

The news came amidst concern that the quake could hamper economic growth.

It would "disturb our growth", Mr Abdullah acknowledged, but "many things can be done to catch up" later.

The earthquake-hit region Yogyakarta accounts for 1.3% of Indonesia's gross domestic product, but a hit here is unlikely to do much to curb Indonesia's growth, which is expected to rise from 5.6% in 2005 to 6.2% this year.

"In all such disasters, the immediate concern is to provide as much relief as possible to the affected areas, and to ensure the safety and well-being of the survivors of this tragedy," said IMF managing director, Rodrigo de Rato

"The international community, including the IMF, supports Indonesia's efforts to respond to this natural disaster."

Rebuilding

Analysts believe reconstruction costs could reach $100m.

The economic strength currently being enjoyed by Indonesia should enable the country to repay almost $4bn of the debts "within weeks", said Mr Abdullah.

Indonesia's debts to the IMF arose during the late 1990s when the Fund put together a $43bn package to help it cope with the Asian economic crisis.

Indonesia's foreign exchange reserves currently stand at almost $44bn, having risen 25% since late 2005, Mr Abdullah said.