Private sector warned for rising offshore borrowing<\/p>\n
JAKARTA (JP): Mohammad Sadli, who has twice held ministerial
\nposts under President Soeharto's leadership, warned yesterday
\nthat uncontrolled inflows of private offshore borrowing could
\npose a threat to the country's economy, given the already heavy
\ndebt burden and high inflation.<\/p>\n
Sadli, who was the minister of mines and energy from 1973 to
\n1978, warned that private offshore borrowing might rise in the
\ncoming years as a result, in part at least, of the government's
\ntightening of local bank lending.<\/p>\n
\"The private sector's proportion of foreign debt is going up
\nand we cannot control it because we follow a free foreign
\nexchange regime,\" Sadli said at a luncheon organized by the
\nIndonesian-Netherlands Association.<\/p>\n
Minister of Finance Mar'ie Muhammad said recently that the
\noutstanding debts of the private sector had surged to US$36.34
\nbillion as of the end of September, while the government's
\noutstanding borrowing stood at US$56.66 billion.<\/p>\n
According to Coordinating Minister for Economy and Finance,
\nSaleh Afiff, the level of the country's outstanding foreign debt
\nis projected to stand at nearly $100 billion at the end of the
\nnext fiscal year, which ends in March 1996. Of this amount, $59
\nbillion is expected to be owed by the government and the
\nremainder by the private sector.<\/p>\n
In its efforts to limit offshore borrowing, the government has
\nasked private sector companies to report their offshore borrowing
\nto the central bank. In the absence of a penalty, however, most
\nprivate sector companies have been reluctant to make reports.<\/p>\n
Inflation<\/p>\n
Sadli, who served as minister of manpower from 1971 to 1973,
\nsaid that an uncontrolled rise in offshore private debts would
\nalso push inflation to a higher level than the targeted five to
\nsix percent this year.<\/p>\n
Inflation declined slightly to 9.24 percent last year from
\n9.77 percent in 1993.<\/p>\n
Considering that the government's draft budget for the 1995-
\n1996 fiscal year is more contractive in nature than this fiscal
\nyear's budget, Sadli said government spending would not
\nsignificantly contribute to inflation.<\/p>\n
The government has asked the House of Representatives to
\napprove an 11.9 percent increase in its budget to Rp 78.02
\ntrillion (US$35.4 billion) in 1995-1995, up from Rp 69.74
\ntrillion budgeted in 1994-1995.<\/p>\n
\"The government has been going all-out to curb inflation in an
\nefficient manner. So, if we still have high inflation this year,
\nwe have the private sector to blame,\" Sadli said.<\/p>\n
\"Everywhere you see the development of golf courses, condos,
\nand other buildings going on ... a lot of private investment
\nactivity,\" he said.<\/p>\n
He hailed the government's decision to slow down the
\nactivities of the private sector, especially those which do not
\nsupport exports, by limiting the expansion of total bank lending
\nto 19 percent for the next fiscal year.<\/p>\n
\"Perhaps, as a result, the rate of growth will not be 7.5
\npercent but somewhat lower and calmer, and inflation will be able
\nto be managed. In the end, the economy will be healthy,\" Sadli
\nsaid.(rid)<\/p>",
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