Analysts see IMF package for RI near $6 billion<\/p>\n
SINGAPORE (Reuter): Indonesia called in the International
\nMonetary Fund (IMF) for help yesterday but analysts doubt any
\npackage would be anywhere near the size of Thailand's US$17.2
\nbillion bailout.<\/p>\n
\"It's probably not a question of how much they will need, it's
\na question of how much they can get,\" said Christa Marti,
\neconomist for Indonesia and Thailand at UBS in Singapore.<\/p>\n
\"But we won't see a package as huge as we did in Thailand,
\ncertainly not. This is not a Thai style crisis.\"<\/p>\n
Net reserves in Indonesia are not as low as in Thailand and
\nanalysts' first estimates were that any package would only be in
\nthe region of $4 billion to $6 billion.<\/p>\n
Indonesia said it would seek assistance from international
\ninstitutions including the IMF to bolster its foreign exchange
\nreserves in the wake of currency turmoil.<\/p>\n
Finance Minister Mar'ie Muhammad, who announced the decision
\nafter a cabinet meeting, did not say how much assistance would be
\nsought, but that Bank Indonesia Governor J. Soedradjad Djiwandono
\nwould finalize the details.<\/p>\n
The IMF gave Thailand roughly five times their quota. Quotas
\nare the amount a member state pays into the IMF and determine
\nboth how much a country can borrow and its voting rights.<\/p>\n
Indonesia's quota is roughly one billion Special Drawing
\nRights (SDR) which at today's rate is around $1.4 billion. One
\nSDR is currently worth $1.3681.<\/p>\n
Analysts said usually a standby facility is a maximum of 300
\npercent of the quota and that points to a package of around $4
\nbillion.<\/p>\n
The Asian Development Bank (ADB) and World Bank may also
\nprovide some liquidity as well and that could bump it up to $6
\nbillion.<\/p>\n
Analysts said all Indonesia needs is dollar liquidity to
\nbolster its roughly $20 billion of reserves to allow domestic
\ncorporates to hedge without pushing the rupiah down sharply.<\/p>\n
There is around $38 billion of short-term debt in Indonesia
\nbut this is private debt and not government debt. If it were
\ngovernment debt it would have to be financed absolutely through
\nreserves.<\/p>\n
However, a lot of banks have been calling in their loans and
\nthis is why Indonesian corporates have been exchanging their
\nrupiah for dollars in order to pay back loans.<\/p>\n
This is what has caused massive downward pressure on the
\nrupiah recently and a top-up in reserves would give the central
\nbank much needed dollars.<\/p>\n
This would allow the corporates, providing they have enough
\nrupiah, to obtain dollars without causing a huge shortage in the
\nbanking system. Acute shortage of dollars coupled with strong
\ndemand would push the U.S. currency up even further and keep the
\nrupiah under pressure.<\/p>\n
In Thailand's case the government guaranteed banking sector
\nshort-term debt which effectively turned it into sovereign debt,
\nwhich in turn needed to be covered by reserves.<\/p>\n
As the debt in Indonesia is being left in the private sector a
\nmassive boost to reserves is simply not required.<\/p>\n
The World Bank said any assistance would aim at restoring
\nconfidence rather than just providing financial help.<\/p>\n
\"I say it's a financial package but its probably more
\nimportant in delivering a message of confidence than it is in
\nactually providing financing,\" said Dennis de Tray, Chief
\nRepresentative of the World Bank in Indonesia. \"The real issue is
\nto ease liquidity into the system to allow people to hedge
\nwithout pushing the rupiah out of line,\" said Chris Tinker,
\nRegional Head of Economics and Debt Research at ING Barings in
\nHong Kong. \"They probably don't need much more than around $4.0
\nbillion.\"<\/p>\n
On top of this it will also enable the IMF to provide some
\nexpertise on how to solve the economic problems which undoubtedly
\nexist in Indonesia, analysts said.<\/p>\n
\"Apart from any financial help it will mean the IMF will be
\nable to inject more effective rationalization on the financial
\nside,\" Tinker added.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/analysts-see-imf-package-for-ri-near-6-billion-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}