Japanese bank proposes debt-servicing fund<\/p>\n
TOKYO (Agencies): Bank of Tokyo-Mitsubishi Ltd (BTM) said
\nyesterday it was proposing to the Japanese and Indonesian
\ngovernments that they set up a fund to allow Indonesian firms to
\nexchange the rupiah for the U.S. dollar at a much stronger rate
\nthan the current level.<\/p>\n
BTM is one of Japan's largest creditors to Indonesia.<\/p>\n
A senior bank official told Reuters that if corporations in
\nIndonesia are able to exchange the rupiah at around 5,000 to the
\ndollar, most of them would stay in business.<\/p>\n
He said that the fund would enable corporations to sell the
\nrupiah for the dollar at around 5,000 in order to service their
\ndollar-denominated debt and to buy the Indonesian currency back
\nfrom the fund at the same exchange rate one year later.<\/p>\n
A fund worth $10 billion to $15 billion might be needed to
\nallow Indonesian corporations to hedge their dollar-based debt,
\nthe senior BTM official said.<\/p>\n
"Stabilizing the currency rate will be the first priority for
\nthe crisis-hit nation," he said.<\/p>\n
Meanwhile a Japanese daily said in Tokyo that the Group of
\nSeven (G-7) major economies will discuss Tokyo-Mitsubishi Bank
\nproposal to set up a $10-15 billion foreign exchange
\nstabilization fund for Indonesia at its meeting in London on Feb.
\n21.<\/p>\n
The Nihon Keizai Shimbun said the step will help alleviate the
\nforeign debts of Indonesian companies, which are denominated
\nmostly in dollars, the leading economic daily said.<\/p>\n
Japan's Ministry of Finance, Foreign Ministry and Ministry of
\nInternational Trade and Industry will send a delegation to
\nIndonesia and Singapore on Wednesday for discussions on the
\neconomic situation in Indonesia.<\/p>\n
The delegation is intended to gather information to help Tokyo
\ndecide what assistance Japan can extend to Indonesia ahead the G-
\n7 meeting later this month, where the Asian financial crisis is
\nexpected to be discussed.<\/p>\n
Japan is Indonesia's largest creditor, with Japanese banks
\naccounting for 39 percent, or $23 billion, of Indonesia's $58.7
\nbillion in foreign bank debt at the end of June 1997, figures
\nreleased by the Bank for International Settlements (BIS) show.<\/p>\n
In late January, Jakarta proposed a temporary freeze on
\ncorporate debt service payments and declared it would adopt new
\nservicing measures and would reform its banking sector.<\/p>\n
A voluntary framework for restructuring Indonesia's foreign
\nprivate debt has been worked out between Indonesian borrowers and
\ntheir creditors. BTM is a member of the lenders' steering
\ncommittee.<\/p>\n
On Monday, President Soeharto said the government would soon
\nannounce new steps on the exchange rate to keep prices of
\npriority imports under control and to provide a certain
\ncalculation base for exports.<\/p>\n
In a related development, Malaysian Deputy Prime Minister
\nAnwar Ibrahim said in Tokyo yesterday that Japan is discussing
\nadditional steps to help Indonesia cope with its debt problems
\nand that he hopes Japan will expand its assistance to Indonesia.<\/p>\n
Asked if he was referring to an idea for the governments of
\nJapan and Indonesia to set up a rupiah stabilization fund, Anwar
\ntold Reuters that the issue was touched on in talks he has held
\nduring a two-day visit to Tokyo.<\/p>",
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"sponsor": "Okusi Associates",
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