The Paris Club of creditor nations will agree today to freeze debt repayments of countries hit by the Asian tsunami, French Finance Minister Mr Herve Gaymard said.
The hardest-hit nation, Indonesia, has said it also needs more donations as well as a debt freeze to cope with the disaster. Some other countries, such as Thailand, have said they do not believe a debt moratorium is the best form of assistance.
But Mr Gaymard said he expected Indonesia, Sri Lanka and the Seychelles to accept the Paris Club's offer.
Indonesia said on Monday it expected Western creditors to allow it to freeze up to 30 trillion rupiah ($3.2 billion) in debt repayments through 2006 to deal with the disaster. That would amount to about one third of its $8.8 billion in scheduled repayments over the next two years to the group of sovereign creditors which has 19 permanent members.
Tsunami-hit countries would not have to accept an offer of a moratorium from the Paris Club, Mr Gaymard said. "Some countries, I'm thinking for example of Thailand, do not wish to benefit from this moratorium simply because they have a lower level of debt than others and they don't want their name to be downgraded on financial markets," he said.
A freeze in debt repayments could offer short-term gain but bring long-term pain as the cost of servicing debt may rise in the future.
Indonesia wants to ensure any Paris Club decision does not adversely affect its talks with the London Club of commercial creditors or affect its rating, which could raise the cost of future borrowings.
The Paris Club, which will also meet tomorrow, will also review an offer by Poland to buy back €12.3 billion of its communist-era debt to the Club this year, as well as a proposal by Russia for early repayment of some of its debt.