RI's external debt high but manageable: Salomon<\/p>\n
JAKARTA (JP): Although Indonesia's external debt burden is
\nrelatively high, it remains manageable, investment bank Salomon
\nBrothers Inc. believes.<\/p>\n
In its latest report on its sovereign assessment on Indonesia,
\nthe bank said that the country's external debt burden is
\noverweighted because there is very little domestic debt.<\/p>\n
\"It is important to note that mismanagement is not the reason
\nbehind Indonesia's high debt burden, but rather the government's
\nlong-standing policy to finance the country's fiscal and current
\naccount deficits via external borrowing,\" Salomon Brothers said
\nin The Republic of Indonesia: Consolidating its Gains, issued in
\nNew York last month and in Jakarta on Saturday.<\/p>\n
According to Indonesia's balanced budget law, the government
\nis not allowed to seek domestic borrowings to fund its fiscal and
\ncurrent account deficits.<\/p>\n
Salomon Brothers contended that Indonesia's external debt is
\nstill under control because virtually all of its public sector
\nexternal debt is of medium- to long-term maturities, and nearly
\nhalf of the total are soft loans with concessional terms.<\/p>\n
Salomon estimated that the country's external debt stood at
\napproximately US$105 billion at the end of last year, up from $95
\nbillion in 1994.<\/p>\n
Out of the loans of almost $105 billion, $79.7 billion have
\nmedium- to long-term maturities and $25 billion bears short-term
\nmaturities.<\/p>\n
Indonesian Minister of Finance Mar'ie Muhammad disclosed in
\nMarch that the public sector external debt had dropped to
\nUS$59.96 billion by last December from $61.3 billion in
\nSeptember.<\/p>\n
Of the outstanding public debt, $23.65 billion was obtained
\nunder bilateral arrangements with long-term maturities and an
\nannual interest rate of 2 percent.<\/p>\n
The other loans, worth $19.24 billion, were secured under
\nmultilateral deals, also with long-term maturities and an average
\nannual interest rate of 7.07 percent, and the remaining $14.85
\nbillion under commercial deals with commercial interest rates.<\/p>\n
Bank Indonesia, the central bank, disclosed recently that 70
\npercent of the total offshore private borrowings secured last
\nyear had medium- to long-term maturities -- over three years --
\nand an average annual interest rate of 1.5 percent above the
\nLondon Inter-bank Offered Rate.<\/p>\n
Private<\/p>\n
Salomon Brothers also applauded the development of Indonesia's
\ndebt structure because the recent rise in the overall debt level
\nmostly resulted from a surge in private sector borrowing.<\/p>\n
In fact, from 1992 to 1994, Indonesia's public sector debt
\nburden increased only by 9.3 percent, while private sector debt
\nincreased by almost 50 percent.<\/p>\n
\"This is a reflection of the growing influence of the private
\nsector on Indonesia's economy, therefore resulting in Indonesian
\ncompanies seeking more attractive debt financing abroad versus
\ndomestic sources of credit,\" the report said.<\/p>\n
Salomon Brothers also projected that Indonesia's external
\ndebt-to-export ratio will continue to decline and is expected to
\nfall to approximately 178 percent by the end of next year, from
\nthe projected 190 percent this year and 202 percent last year.<\/p>\n
It also forecasted that the country's debt service ratio will
\ncontinue to decline steadily in the coming years as a result of
\nthe government's prepayment of its high-interest rate debts.<\/p>\n
The report said: \"This trend should continue as the government
\ncontinues to pay back old high-interest rate debt and strong
\nexports growth is maintained.\"<\/p>\n
Minister Mar'ie said last week that Indonesia would prepay
\nhigh-interest loans of around $625 million provided by the Asian
\nDevelopment Bank. The fund for the prepayment would come from the
\nsurplus in the 1995\/1996 budget.<\/p>\n
The country has so far prepaid a total of $1.5 billion in
\nhigh-interest debts to the Asian Development Bank and the World
\nBank. The fund for the debt prepayment came from the government's
\nselling of its shares in telecommunication firms PT Indosat and
\nPT Telkom and tin miner PT Tambang Timah on overseas stock
\nmarkets.<\/p>\n
Salomon believes that Indonesia's dependence on foreign
\nfinancing will decrease gradually in line with increasing export
\nactivities, rising domestic and foreign investment and also
\ngrowing domestic savings. (rid)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/ris-external-debt-high-but-manageable-salomon-1447893297",
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