A Big Freeze: Payments Halted On $65 Billion In Loans

American and other foreign lenders won't be paid anytime soon on some $65 billion in loans to Indonesia.

An official "pause" in payments was announced Jan. 27 by the government to help 228 private firms faced with crushing debt, many of whom have already stopped payments.

Economic analysts said the debt-servicing freeze amounted to a moratorium and that Indonesia's corporate debt problem would take at least a year to solve, with the chance that not all creditors would ever be repaid.

The country's total external debt stands at $140 billion and analysts say some of the $65 billion in corporate debt is virtually impossible to pay, given the rupiah's 80-percent drop in value against the American dollar since July.

Pen Kent, former executive director of Britain's central bank, and now an adviser to Jakarta, said there had to be "mutual self-interest" to sort out the problem.

At the same time, officials promised bank reform that would allow foreign takeovers of banks and guarantee the deposits of Indonesians. The latter step is designed to prevent a run on banks.