No worries about debt: BI chief<\/p>\n
JAKARTA (JP): Bank Indonesia's Governor Soedradjad Djiwandono
\nreassured foreign bankers yesterday that the country's
\ninternational reserve holdings have been diversified to match its
\nannual foreign liabilities.<\/p>\n
\"Therefore, there should not be any worries about our
\ncapability to service our foreign debts,\" Soedradjad told a
\nbusiness luncheon of the Association of Foreign Banks'
\nRepresentatives here.<\/p>\n
Soedradjad acknowledged, though, that the yen's surge has had
\na significant impact on Indonesia's foreign debt stocks because
\naround 40 percent of its foreign liabilities is in yen.<\/p>\n
He said did not want to belittle the impact of the steep rise
\nof the Japanese yen, notably against the American dollar, since
\nearly last month.<\/p>\n
But in so far as Indonesia's foreign debt service burdens this
\nyear are concerned, the impact of the appreciating yen is rather
\nsmall, he added.<\/p>\n
The 1995-1996 state budget allocates Rp 17,900 billion ($8
\nbillion) for servicing the government's foreign debts.<\/p>\n
He said the annual foreign debt service burdens are calculated
\nat the beginning of every year.<\/p>\n
\"We already know far in advance how much we should repay in
\ndollar or yen and other foreign currencies this year. And we have
\naccordingly adjusted the composition of our foreign reserve
\nholdings,\" Soedradjad added.<\/p>\n
Increase<\/p>\n
For example, he noted, 35 percent of Indonesia's foreign
\nreserves of about US$13.3 billion at present consists of yen.
\nThat is a marked increase from 27 percent in 1993.<\/p>\n
Soedradjad recounted analysts' estimates that every one
\npercent rise in the yen's rate against the dollar raises the
\namount of Indonesian foreign debts outstanding by around $300
\nmillion.<\/p>\n
He conceded that if Indonesia's total foreign debts, currently
\nestimated at the equivalent of around $90 billion (including $24
\nbillion in private sector's loans), were converted into dollars,
\ntheir amount might have been very close to the $100 billion mark.<\/p>\n
Analysts here estimate that the 16 percent rise in the yen's
\nrate over the last six weeks alone has increased Indonesia's
\nforeign debt stocks by at least $5.7 billion.<\/p>\n
\"But one should take into account that most of our foreign
\ndebts are long-term liabilities with maturities ranging from 15
\nto 20 years,\" Soedradjad argued.<\/p>\n
During that long period of time, the total debt stocks may
\nfluctuate according to developments in the yen's exchange rate,
\nhe said.<\/p>\n
He admitted that in the longer term the rise in the debt
\nstocks would increase Indonesia's debt service ratio against
\nexports which is now estimated at 31 percent.<\/p>\n
Therefore, he added, it has become more imperative now to
\nfurther increase exports because \"our capacity to repay our debts
\ndepends on our export capability.\"<\/p>\n
Challenges<\/p>\n
Earlier in his remarks at the meeting, Soedradjad described
\nthe challenges Indonesia has been facing as a result of the
\nopening of its economy to international competition.<\/p>\n
\"On one hand, we are facing uncertainty about the world
\neconomy, the international financial and monetary condition,\" he
\nsaid.<\/p>\n
On the other, he added, Indonesia is encountering increasingly
\ntough competition because almost all other countries have also
\nbeen reforming their economies to become more efficient and
\ncompetitive.<\/p>\n
\"Therefore, we have no other choice. We have to adjust to the
\nreality all the time through deregulation measures and prudent
\nmacro-economic management,\" Soedradjad added.<\/p>\n
The government, he noted, must maintain a prudent fiscal and
\nmonetary management as well.<\/p>\n
\"We have been pursuing a sound fiscal policy by requiring the
\nstate budget to be balanced every year.\"<\/p>\n
On the monetary side, the government has been working hard to
\nmaintain a sound balance of payments with a sustainable current
\naccount deficit, realistic exchange rate and single-digit
\ninflation.<\/p>\n
These tasks, Soedradjad conceded, are not simple or easy,
\nespecially because the open economy makes Indonesia quite
\nsensitive to the developments in the world economy where
\nuncertainty is the rule. (vin)<\/p>",
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