Indonesia reached a deal with international bankers Thursday to reschedule nearly $80 billion worth of foreign debts owed by corporations badly battered by Asia's financial crisis.
The government hailed the debt package as a major breakthrough in its attempts to deal with the nation's worst economic crisis in 30 years.
"The historic agreements . . . demonstrate both support for and long-term confidence in the Indonesian economy," said Ginandjar Kartasasmita, the nation's minister for economy and finance.
Indonesia, the world's fourth-most populous nation, has been the hardest hit by the Asian financial meltdown.
Many of its largest companies and banks are technically insolvent because of a dramatic dive of about 80% in the value of the currency, the rupiah, against the dollar.
The crisis has disrupted production and trade, and has triggered soaring inflation and mass unemployment. Social unrest climaxed last month when deadly riots prompted the resignation of former President Suharto, ending his 32-year authoritarian grip on power.
Under the debt plan, Indonesia officials and foreign bankers agreed to ease some of the repayment burden on debt-ridden businesses and help creditors recover some assets.
At the end of four days of negotiations in Frankfurt, Germany, the two sides set out a three-point program to extend payments on corporate, bank and trade finance debts.
"These agreements . . . are of major importance for the Indonesian economy," said IMF Managing Director Michel Camdessus. He predicted they would relieve pressure on the national currency and "revive trade and economic activity."
He said IMF negotiators will hold talks with Indonesian officials starting Monday over the next $1-billion installment of the fund's $43-billion rescue package.
Under the debt plan, up to $60 billion in corporate debt will be handled by a new agency, the Indonesian Debt Restructuring Agency, which will start operations Aug. 1.
It will protect corporate debtors from fluctuations in exchange rates. It will also ensure that foreign exchange remains available to private debtors who agree to restructure foreign debts for eight years, with a three-year grace period during which no principal will be paid.
A second arrangement calls for extending by up to four years the maturities of an estimated $9.2 billion of foreign debts owed by the nation's commercial banks. It covers loans due before March 31, 1999.
The third agreement covers about $4.4 billion in trade financing agreements.