Sjahril targets lower rates, stronger rupiah<\/p>\n
PARIS (Dow Jones): Bank Indonesia Governor Sjahril Sabirin
\nsaid Tuesday he sees room for further interest-rate declines in
\nIndonesia, and hopes for a concurrent rise in the rupiah's rate
\nagainst the dollar.<\/p>\n
In an interview with Dow Jones Newswires in Paris, Sjahril
\nsaid: \"I'm rather optimistic that we will have the opportunity to
\nlet interest rates go down...But any lowering from the current
\nlevel would have to be done very gradually.\"<\/p>\n
He gave as a reference the decline in rates from over 70
\npercent in September to around 37 percent now, and said any
\nfurther fall in interest rates would \"have to occur more slowly
\nthan that.\"<\/p>\n
Asked whether the current rupiah rate against the dollar was
\nsufficiently strong to allow a recovery in the Indonesian
\neconomy, Sjahril said, \"the current level of the rupiah is
\nalready all right.\"<\/p>\n
He added, however, that the central bank would prefer to see
\nthe currency return to its position of a few months ago.<\/p>\n
\"Of course, we wish that the rupiah would strengthen a bit
\nmore, to reach its level from early December of around Rp 7,500
\nto the dollar.\" he said.<\/p>\n
Interest rates on benchmark one-month central bank notes fell
\nslightly - just four basis points - at last week's auction, the
\nfirst drop since Jan. 6. Market participants doubt Bank Indonesia
\ncan guide rates much lower than that now, despite its stated wish
\nto do so, given the rupiah's weakness.<\/p>\n
Although the currency strengthened a bit on the government's
\nlong-awaited recent announcement that it would close 38 banks, it
\nhas since slipped back. Late Tuesday, the rupiah was quoted at Rp
\n8,950 to the dollar.<\/p>\n
Sjahril gave a presentation to French bankers and to the Bank
\nof France Monday on bank restructuring in Indonesia. He said the
\nbankers received the presentation \"positively,\" but declined to
\ngo into detail.<\/p>\n
Commenting on the restructuring plan, Sjahril said that of the
\nRp 300 trillion in bonds to be issued as part of bank
\nrecapitalization in Indonesia, only a small portion would
\nprobably be resold on the debt market.<\/p>\n
The government plans to issue over Rp 150 trillion in bonds to
\nrecapitalize banks, beyond the Rp 140 trillion in bonds to be
\nissued to replace current central bank credits.<\/p>\n
Of the bonds to be issued to recapitalize banks, \"a portion
\nmay be allowed to be sold on the market by the banks, depending
\non the liquidity of each individual bank, but it would have to be
\ndone in a very careful manner so it wouldn't impact too much the
\nbond market...It would have to be a small amount,\" Sjahril said.<\/p>\n
He added he expected any bonds sold on the market to be bought
\nup largely by domestic investors, but added that international
\ninvestors should not be excluded.<\/p>\n
Asked whether he thought there was truth behind a rumor
\nstemming from recurring press reports in Indonesia that the
\ngovernment plans to merge five large private banks - listed Bank
\nNiaga, Bank Lippo, Bank Bali, Bank Universal, and unlisted Bank
\nBumiputera - Sjahril said, \"I don't think so.\"<\/p>\n
He added that he hadn't seen the proposal on the bank mergers,
\nbut speculated that whoever came up with the proposal had leaked
\nit to the press as a test balloon.<\/p>\n
Bank Indonesia Director Dono Iskandar and other Indonesian
\nofficials are meeting international bankers Tuesday, under the
\naegis of the London Club of private creditors, in order to try to
\nmove forward on negotiating the rescheduling of between US$2
\nbillion and $4 billion in interbank debt maturing between April
\n1, 1999, and Dec. 31, 2001.<\/p>\n
Sjahril, who won't attend that meeting in London, said he felt
\nthe appropriate structures were now in place to move forward on
\ninterbank and corporate debt issues, but said, \"creditors and
\ndebtors must come together and creditors must agree among
\nthemselves (on a common framework for debt restructuring) before
\nthey can come to agreement with debtors.\"<\/p>\n
In particular, Sjahril noted that not all international
\nbankers agree on granting so-called \"haircuts\" to reduce
\nIndonesian corporate debt.<\/p>\n
Indeed, as well as the reluctance of Indonesian companies to
\nstart talking to their bankers, another obstacle is the
\nreluctance of banks to write off debt, or give \"haircuts\" to
\nIndonesian companies on some debt and then agree to restructure
\nthe rest. Breaking that deadlock is seen as crucial to nudging
\nthe restructuring process on.<\/p>",
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