BI calm about yen surge<\/p>\n
JAKARTA (JP): Bank Indonesia Governor J. Soedradjad Djiwandono
\nsaid yesterday that the yen's surge would not have an adverse
\nimpact on the Indonesian economy, even though nearly 40 percent
\nof the country's external debts is denominated in the Japanese
\ncurrency.<\/p>\n
\"The government has acknowledged several times that any
\nincrease in the yen rate will have a potentially negative effect
\non the country's outstanding debts. But the real impact is not as
\nbig as feared by some analysts,\" the central bank's governor told
\na press briefing.<\/p>\n
Soedradjad said that the surge in the value of the yen or any
\nother major currency could theoretically affect the country's
\nforeign loans. The real impact of the appreciation on the debt
\nservice burden, however, depends on the rates effective during
\nthe repayment period.<\/p>\n
\"From that standpoint, the people should not have been shocked
\nby the yen's appreciation over the last few days. The real impact
\nwill be felt only during the loan repayment period,\" he said.<\/p>\n
Soedradjad cautioned that simply calculating the impact of
\nthe yen's surge into the total value of the country's loans is
\nnot accurate since the rate of the yen is constantly fluctuating.<\/p>\n
\"Moreover,\" he stressed, \"the loan repayment of the foreign
\ndebts is made on a year-to-year basis.\"<\/p>\n
The dollar tumbled below the psychologically important 90-yen
\nlevel to its post-war low of 89.65 yen and 1.3690 marks in Tokyo
\nWednesday before climbing back to 90 and 91 in the last two days.<\/p>\n
Soedradjad admitted that the yen's surge had fueled a dollar
\nrush in the local money market mid-week as fund managers and
\nother speculators tried to benefit from the uncertainty. \"The
\ncentral bank was forced to intervene into the market by selling
\nthe dollar to stabilize the rupiah,\" he added.<\/p>\n
On Wednesday several speculators dumped their rupiah and
\nbought the greenback on worries that the yen's surge might hurt
\nthe Indonesian economy.<\/p>\n
Earlier in January, the local money market was also feeling
\nthe pressure as fund managers dumped their rupiah in the wake of
\nthe Mexican financial crisis. Speculators feared that a similar
\ncrisis would also take place in Indonesia.<\/p>\n
The central bank governor blamed the fresh dollar rush on the
\nspeculative trading of foreign fund managers.<\/p>\n
\"The people seemed shocked. It was as if the surge in the
\nyen's value was the end of the day. It's not right,\" he said of
\nthe people's jitters.<\/p>\n
Besides, he added, most of the country's external debts are
\nbased on long-term contracts and their service and installment
\npayments are made on an annual basis.<\/p>\n
\"So there is no reason to worry about the appreciation of yen.
\nIn fact, it is now stabilizing,\" he said.<\/p>\n
According to the central bank governor, any analysis should be
\nbased on the government's ability to service and install its
\ndebts this year.<\/p>\n
\"From this standpoint, the position of our foreign reserves
\nare safe, more than enough to cover five months of imports,\" he
\nadded.<\/p>\n
Soedradjad said that around 35 percent of the US$12.97 billion
\nforeign reserves held by the central bank is kept in Japanese yen
\naccounts.<\/p>\n
The proportion of yen holdings in the total international
\nreserves is comfortable enough to service and install the yen-
\ndenominated debts,\" he said.<\/p>\n
Soedradjad added that the percentage of yen in the reserves
\nwould be increased to anticipate a future surge in the yen.<\/p>\n
Minister of Finance Mar'ie Muhammad announced recently that
\nthe country's outstanding debts totaled $87.6 billion as of last
\nDecember, of which $58.6 billion were owed by the government, $24
\nbillion by private borrowers and $5 billion by state companies.<\/p>\n
The government allocated around Rp 17.65 trillion ($8.2
\nbillion) of the 1994-1995 state budget for debt servicing and
\ninstallments and another Rp 17.89 trillion ($8.32 billion) from
\nthe 1995-1996 budget.<\/p>\n
Debt servicing and installments account for around 23 percent
\nof the Rp 78.02 trillion in spending projected in the next fiscal
\nyear, which begins next month. (hen)<\/p>",
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