BI secures US$500 million in standby loans<\/p>\n
By Hendarsyah Tarmizi<\/p>\n
SINGAPORE (JP): A syndication of 44 major banks committed
\nthemselves yesterday to providing Bank Indonesia with US$500
\nmillion in fresh standby loans with a maturity of eight years.<\/p>\n
The loans, carrying an annual interest rate of 0.625 of a
\npercent above the London Inter-bank Offered Rates, will be used
\nby the Indonesian central bank to back up the country's balance
\nof payments.<\/p>\n
Bank Indonesia's managing director for foreign affairs, Paul
\nSutopo, said that the loan facility would be cashed only if the
\ncentral bank feels it necessary.<\/p>\n
The loans would carry a commitment fee of 0.31 percent per
\nannum.<\/p>\n
\"The standby loan is one of Bank Indonesia's monetary tools
\nto back up its foreign reserves,\" he told journalists following
\nthe signing of the standby loan commitment.<\/p>\n
The loans, one of a series signed by the central bank since
\n1984, were arranged by six major banks, including Banque
\nNationale de Paris, Chase Manhattan, DKB Asia Limited, and
\nDresdner (South East Asia Limited). The loan facility is also
\nsupported by 38 other major banks.<\/p>\n
Sutopo said the number of banks taking part in the new standby
\nloan facility is much bigger than last year, reflecting improved
\ninternational support for Indonesia.<\/p>\n
\"The interest rate of the new standby facility is similar to
\nthat on the previous loans,\" he said. \"But overall, the terms and
\nconditions of this new facility are much more flexible.\"<\/p>\n
Sutopo said that the central bank had to secure the new
\nstandby loans to maintain the level of its standby loans at $2
\nbillion.<\/p>\n
\"About $500 million of the old standby loans have matured and
\nwe, therefore, needed to secure a similar amount of new standby
\nloans,\" Sutopo said.<\/p>\n
The central bank began using a standby loan facility in 1984
\nas a debt instrument to support the country's balance of
\npayments. The loans have been gradually increased to the $2-
\nbillion level.<\/p>\n
Such a debt instrument is essential to enable Indonesia to
\ncurb the negative impact of the globalization of the world's
\nfinancial markets.<\/p>\n
\"The globalization of the world's financial sector does not
\nonly mean an increase in the inflows of much needed capital but
\nalso means highly-disruptive capital outflows,\" he said.<\/p>\n
In addition to the standby loan facilities, Bank Indonesia has
\nalso signed agreements on bilateral cooperation with central
\nbanks and monetary authorities in Asia and Australia to cushion
\npossible massive outflows of foreign funds.<\/p>\n
The most recent deals were the repurchase (repo) agreements
\nwith six Asian and Australian central banks.<\/p>\n
Sutopo said the repo agreements will enable each central bank
\nin the region to sell their U.S. dollar-denominated treasury
\nnotes to their counterparts for fresh cash under a repurchase
\nbasis.<\/p>\n
\"These agreements have been aimed at enhancing regional
\nstability -- not by attempting to eliminate speculation all
\ntogether but rather to make speculation a more lose-lose
\nsituation,\" he explained.<\/p>\n
The so-called repo deals were signed following massive
\nwithdrawals of short-term foreign funds from Mexico in December,
\n1994.<\/p>\n
Mexico fell into economic chaos after devaluing the peso in
\nDecember 1994 during a balance of payments crisis. The crisis
\ntriggered fears of similar devaluations in Asia, with the Thai
\nbaht, the Hong Kong dollar, the Philippine peso and the
\nIndonesian rupiah coming under speculative attacks due to the
\ndomino affect of the Mexican tragedy.<\/p>\n
According to JP Morgan's commercial banking subsidiary, Morgan
\nGuaranty, Indonesia's latest economic indicators have proved
\nbetter than expected.<\/p>\n
The closely-watched trade balance came firmly into the black
\nat $847.5 million in February, the fifth consecutive month of
\nstrong showings in excess of $500 million, the bank said.<\/p>\n
The country's official foreign exchange reserves climbed
\nsteadily from $14.2 billion as of last October to $16 billion at
\nthe end of April.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/bi-secures-us500-million-in-standby-loans-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}