"What we have in mind is a temporary pause, so that we have time to reach an agreement between lenders and borrowers," said Radius Prawiro, a former cabinet minister appointed by President Suharto to help resolve the debt crisis. But he insisted Indonesia had no intention of seeking a national private debt moratorium.
Analysts said the announcement was vague, and made no mention of reform for Indonesia's unenforcable bankruptcy laws. A steering committee will be set up, including representatives of creditor banks, but there was no official word of how long the repayment freeze would remain in place.
But the uncertainty fostered by the moratorium was offset by the banking reforms, which will open Indonesian banks to foreign ownership and create a new body, the Indonesian Bank Restructuring Agency (IBRA), to take over and recover crippled banks.
Mari'e Muhammad, the finance minister, also announced government guarantees for depositors and creditors of commercial banks. Asia's markets are winding down for a long weekend due to the Chinese New Year and the Muslim holiday Eid al-Fitr, and the impact of the reforms on the markets will not be clear until next week.
The rupiah's plunge to a fifth of its value six months ago has made it impossibly expensive for companies to pay back dollar-denominated loans from foreign banks. Conservative estimates of private sector debt put it at $66bn (pounds 40bn), rendering most Indonesian companies technically insolvent.
Meanwhile Fitch IBCA, the credit rating agency, said Japanese banks faced "significant" risks as a result of the Asian crisis which, added to their other problems, could lead to downward rating adjustments.
Fitch IBCA estimated the extent of world-wide bank exposure to the south-east Asian region at more than $600bn.