INDRA caps debt conversion rate at Rp 13,233 per dollar<\/p>\n
JAKARTA (JP): The Indonesian Debt Restructuring Agency (INDRA)
\nhas capped the rupiah exchange rate for the country's corporate
\ndebtors participating in the government-sponsored foreign debt
\nrestructuring program at 13,233 against the U.S. dollar.<\/p>\n
Bank Indonesia director Dono Iskandar said yesterday that the
\nexchange rate, set for this month from the market average over
\nthe past 20 days, was the "cap on the exchange rate to be used in
\nthe program".<\/p>\n
"The rate is expected to improve over the program's period,
\nbut it will not worsen," he told reporters following a ceremony
\nto launch the debt restructuring program, which is open for entry
\nfor a year-long period from yesterday.<\/p>\n
He explained that the exchange rate would be readjusted every
\nmonth and that there would be a reset in June 1999, in which
\ndebtors entering the scheme earlier at higher exchange rates
\nwould receive a refund of the difference.<\/p>\n
The INDRA debt restructuring program is part of a gentleman's
\nagreement made in Frankfurt early June between representatives of
\nIndonesia's private debtors and foreign creditors. The
\narrangement allows US$64 billion in private sector overseas debt
\nto be restructured over eight years, including a grace period of
\nthree years.<\/p>\n
Dono said that both individual debtors and creditors had to
\nfirst agree to restructure their debt over an eight year period
\nbefore being allowed to participate in the INDRA scheme.<\/p>\n
Under the INDRA scenario, debtors will make monthly
\ninstallments on their principal and interest in rupiah value,
\nbased on a lock-in exchange rate. Also, the central bank will
\nonly pay interest in dollars to the creditors during the three-
\nyear grace period, he explained.<\/p>\n
He admitted, however, that many Indonesian debtors would still
\nfind it difficult to pay their debts even at the lock-in exchange
\nrates.<\/p>\n
The rupiah stood at 2,450 to the dollar just before the crisis
\nbroke and many debts were incurred at this rate or when the
\ncurrency was slightly stronger. The rupiah is now hovering around
\n13,000 against the greenback.<\/p>\n
"That's why the debtors have to sit down with their creditors
\nand get a haircut," Dono said, referring to a debt reduction.<\/p>\n
Dono explained that if about 60 percent of the 2,000 indebted
\nIndonesian companies joined INDRA, the rupiah would strengthen,
\nautomatically solving many of the country's economic
\ndifficulties, including the huge budget deficit resulting from
\nvarious subsidy commitments.<\/p>\n
He pointed out that a massive $34 billion in debt, including
\nbank debt, was due this year, which had put severe pressure on
\nthe rupiah.<\/p>\n
The INDRA scheme could lessen the high demand for dollars this
\nyear because the debt repayment would be stretched over eight
\nyears, while BI would only pay its interest during the three-year
\ngrace period, Dono explained.<\/p>\n
"So we may only need about $2 billion to $3 billion a year,"
\nhe said, pointing out that the relatively smaller demand for
\ndollars would help strengthen the rupiah.<\/p>\n
He said that if foreign creditors failed to provide a debt
\nreduction, many companies would have no other option but to file
\nfor bankruptcy.<\/p>\n
"But the bankruptcy option may not be the best alternative
\nsince the debtors' assets may be far from enough to cover their
\ndebt," he said.<\/p>\n
Dono also said yesterday that the central bank had pushed back
\nthe deadline for extending the maturities of more than $7 billion
\nin the country's bank foreign debts to Aug. 6 from July 30.<\/p>\n
It was the third time BI has pushed back the deadline.<\/p>\n
"It was delayed until August 6 because of the complicated
\nnature of the bank debt," he said, pointing out that debt-
\ncalculating had been more complicated than anticipated,
\nespecially for commercial papers.<\/p>\n
The original deadline, as agreed in Frankfurt, was July 15.
\n(rei)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/indra-caps-debt-conversion-rate-at-rp-13233-per-dollar-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}