Govt allocates $5.5b to L\/C guarantee plan<\/p>\n
JAKARTA (JP): The government has pumped in US$5.5 billion to
\nguarantee letters of credit (L\/Cs) for local exporters hit by
\nfrozen international bank lines of credit, a director of the
\ncentral bank said on Thursday.<\/p>\n
The measure is part of the efforts to accelerate the recovery
\nof the real sector badly hit by high interest rates, Bank
\nIndonesia director Miranda Goeltom said.<\/p>\n
\"Until now there are seven L\/C guarantee schemes which have
\nbeen or will soon be operational,\" she told a seminar.<\/p>\n
The schemes include government deposits in foreign banks as
\nL\/C guarantees.<\/p>\n
Negotiations are ongoing with Germany, the Netherlands, China,
\nSingapore and Brunei to also provide financing loans for
\nIndonesian exporters to import raw materials, she added.<\/p>\n
Plunging confidence in the country's troubled banking sector
\nprompted international banks to reject local L\/Cs. Bank
\nIndonesia stepped in during the middle of this year by opening
\nmore than $1 billion in deposits at foreign banks to guarantee
\nthe L\/Cs. The central bank signed an agreement in July with 21
\nlocal banks to provide Rp 2.5 trillion in government-guaranteed
\nloans to exporters.<\/p>\n
Miranda said other efforts to help revive the real sector
\nincluded Rp 10.8 trillion in heavily subsidized loans, carrying
\nan average interest rate of 16 percent, to be provided to small
\nand medium companies and cooperatives.<\/p>\n
She explained there had to be contingency efforts to boost
\ncertain sectors of the economy because the high interest rates
\nwould take time to be lowered.<\/p>\n
\"A preliminary study by Bank Indonesia shows that several
\nsectors are quite eligible to be given the priority (for the
\ncredit assistance) because of their impact in employment creation
\nand to the recovery of the economy.\"<\/p>\n
Interest rates<\/p>\n
She cited agribusiness, export-oriented industries, other
\npromising sectors being battered by the sharp decline in the
\npeople's purchasing power and sectors with high ripple effects,
\nincluding construction.<\/p>\n
Despite the recent strengthening of the rupiah and positive
\ndevelopments in inflation, Miranda explained the central bank
\nwould resist drastically easing its tight monetary policy for the
\ntime being.<\/p>\n
She said the pressure on inflation had not totally faded and
\nthe exchange rate of the rupiah was still vulnerable to
\ndevelopments in noneconomic factors.<\/p>\n
\"We won't give up to pressure for a drastic cut in interest
\nrates even if we have to be confronted with demonstrators. I'd
\nrather quit.\"<\/p>\n
Bank Indonesia adopted the high interest rate policy to curb
\ninflation and stabilize the rupiah.<\/p>\n
The value of the rupiah against the U.S. dollar has
\ndramatically increased in recent weeks, currently hovering around
\nRp 7,500 to the dollar, compared to more than Rp 11,000 last
\nmonth and Rp 14,000 in June. The currency was at Rp 2,450 before
\nthe crisis started in July last year.<\/p>\n
Inflation in September was 3.75 percent, compared to 6.30
\npercent in August. Bank Indonesia Governor expected inflation in
\nOctober to be zero or dip into negative.<\/p>\n
Miranda forecast a year-end interest rate level of 40 percent
\nto 50 percent if developments in currency and inflation factors
\ncontinued to be positive.<\/p>\n
The benchmark interest rate on Bank Indonesia's one-month
\npromissory note has declined from 70 percent last month to 56
\npercent on Wednesday.<\/p>\n
The business community is pushing monetary authorities to
\nlower the interest rates as the current level is the highest in
\nthe region. Some argue the rates must be below 25 percent for the
\nbusiness sector to run normally.<\/p>\n
\"The problem (of the real sector) will not be settled just by
\nlowering interest rates. Don't look at the problem partially,\"
\nMiranda said.<\/p>\n
She argued the crisis in the banking and corporate sector had
\nyet to bottom out. (rei)<\/p>",
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"sponsor": "Okusi Associates",
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