Our foreign debts<\/p>\n
President Soeharto has reassured the people once again that
\nour foreign debts, currently estimated at around US$100 billion,
\nincluding the $40 billion owed by the private sector, are well
\nmanaged. The President made the remarks yesterday apparently to
\nallay the fears that such a large amount of foreign debts would
\nbe a great burden for the next generation.<\/p>\n
He reaffirmed that the official foreign borrowings have been
\nused entirely for productive rather than consumer purposes. The
\nfunds have been invested to increase the country's economic
\nassets. He said the government could easily repay all its foreign
\ndebts by selling part of the state-owned companies, which at
\npresent have combined assets of Rp 358 trillion ($179 billion).
\nBut such an outright amortization would not be efficient because
\nmost of the loans are long term and their interest rates, notably
\nthose derived from foreign governments, are relatively low.<\/p>\n
The President's statement should be seen as highly credible
\nbecause Indonesia's foreign debt management has been assessed as
\nquite prudent by foreign creditors, including multilateral aid
\nagencies, such as the World Bank, over the past two decades. The
\ncountry has maintained a high level reputation of being a good
\nborrower with exemplary debt-servicing records. No wonder, its
\ninternational credit rating has always been fairly high.<\/p>\n
Despite the impressive records, we don't think the President
\nhad any intention of belittling the consequence of the huge
\ndebts. Neither is it likely that he wanted to show an attitude of
\ncomplacency on the part of the government with regard to the debt
\nburdens.<\/p>\n
Measured by whatever ratio, the $100 billion in debts is a
\nvery sizable sum. The debts have reached as high as 75 percent of
\nour gross domestic product, or a level more than double our
\nannual export earnings. Our annual foreign debt service burdens
\nhave exceeded 30 percent of our annual export earnings and
\naccount for 70 percent of the government's personnel budget, or
\n38 percent of the total operating budget for the state. In fact,
\nthe public sector's capital accounts can now be said to be in
\ndeficit in the sense that annual debt servicing and installment
\npayments are larger than new borrowings.<\/p>\n
These warning indicators, as reflected in the uncomfortable
\nratios, show that we are treading a very narrow and slippery
\npath. We are widely exposed to the great risk of any rise in the
\ninternational interest rates because almost 50 percent of the
\nofficial foreign debts, notably those from the World Bank and
\nAsian Development Bank are subject to variable interest rates
\nwhich currently stand at a range of 6 percent to 7 percent. We
\nalso are highly vulnerable to cross-currency exchange rate
\nfluctuations, as in the case of the recent steep appreciation of
\nthe yen against the American dollar. Even though oil and natural
\ngas now contribute only about 25 percent of our exports, the oil
\nprice volatility still poses big dangers to our balance of
\npayments.<\/p>\n
That means that the verge between stability and instability is
\nalready very thin. Our leeway for maneuverability is becoming
\nincreasingly restricted. The slightest mistake in our macro-
\neconomic management could damage the international confidence in
\nthis nation with all the damaging repercussions on the monetary
\nsector and eventually the economy as a whole. Any signs of
\nrelaxation in the debt management or in the prudent fiscal and
\nmonetary management may have a similarly damaging impact.<\/p>\n
What makes our position all the more precarious is that all
\nthe risks related to our heavy exposure to foreign debts are
\nbeyond our management or control. The best we can do to cope with
\nall of the inherent risks is to strengthen our economic
\nresilience by maintaining prudent macro-economic policies,
\nincluding the control of new borrowings by both the public and
\nprivate sectors, and introducing reform measures to expand our
\nexport capability.<\/p>\n
If our macro-economic management remains prudent and our
\nexports continue to grow, our huge foreign debts will not likely
\ncause inordinate worries in the international financial market
\nand we will be able to weather any fallout from a financial
\ncrisis in other markets, such as the one in Mexico early this
\nyear. In fact, our success in coping with the repercussions from
\nthe Mexican financial crisis in early January and the yen's steep
\nappreciation in March should be credited to our consistency in
\nmaintaining our macro-economic management.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/our-foreign-debts-1447893297",
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