Trade deficit hasn't dented forex reserves: BI<\/p>\n
JAKARTA (JP): Bank Indonesia Governor J. Soedradjad Djiwandono
\nsaid yesterday that Indonesia's June trade deficit had not
\naffected the country's foreign exchange reserves.<\/p>\n
Soedradjad told a hearing with the House of Representatives'
\nCommission VII, which overseas trade, banking and finance, that
\nexchange reserves held by Bank Indonesia had increased
\nsignificantly over the past few months through banks' foreign
\nexchange sales to the central bank.<\/p>\n
He said that the trade deficit could be covered by the inflow
\nof foreign capital, especially private capital. Therefore, the
\nforeign exchange reserves of the central bank had not been
\naffected.<\/p>\n
Bank Indonesia's foreign exchange reserves stood at $14.29
\nbillion as of last July, up from $13.88 billion in June, $13.42
\nbillion in May and $13.39 billion in April. But the reserves
\ndeclined slightly to $14.26 billion (sufficient to finance
\nimports for 4.56 months) in August.<\/p>\n
Indonesia recorded a trade deficit of $204.9 million in June,
\nthe first in the past four years.<\/p>\n
Meanwhile, Minister of Industry Tunky Ariwibowo told
\njournalists after a hearing with the House's Investment,
\nManufacturing, Mines and Energy Commission yesterday that
\nIndonesia should make all-out efforts to increase exports in
\norder to cope with the trade deficit.<\/p>\n
"We should first examine what were the main causes of the
\ndeclining exports and of the increasing imports... so that we can
\ntake effective measures to deal with the trade deficit," Tunky
\nsaid.<\/p>\n
Soedradjad said that efforts to boost exports and reduce
\nimports are important, not only to restore the trade balance to
\nsurplus, but also to reduce the current account deficit.<\/p>\n
He said that during the current fiscal year, Indonesia's
\ncurrent account deficit may exceed the earlier estimate of US$4.1
\nbillion. The current account deficit last fiscal year was $3.4
\nbillion.<\/p>\n
Balance of payments<\/p>\n
"However, our balance of payments is still in a safe position
\nbecause, as I said, the deficit can be covered by the inflow of
\nforeign capital, especially private capital," Soedradjad said.<\/p>\n
He said that the current account deficit will be caused mainly
\nby the deficit in the service account, which is expected to reach
\na deficit of $12.4 billion, as compared with a deficit of $11.5
\nbillion last fiscal year.<\/p>\n
In pace with the rise in investment activities in Indonesia,
\nSoedradjad said imports are projected to increase further this
\nfiscal year to $37.1 billion, from $34.1 billion in the 1994\/1995
\nfiscal year. Meanwhile, exports are expected to rise to $45.4
\nbillion, up from $42.2 billion last fiscal year.<\/p>\n
"The only way to reduce our current account deficit is by
\nboosting our exports and restraining imports as well as reducing
\nour deficit in services," Soedradjad said.<\/p>\n
Soedradjad added that overseas borrowings by commercial banks
\nhad been kept within the limits set annually by the government.<\/p>\n
In fiscal year 1992\/1993, for example, the ceiling on overseas
\nborrowings was set at US$1.18 billion and the actual borrowings
\ntotaled $1.08 billion.<\/p>\n
Between the 1993\/1994 and the 1995\/1996 fiscal year, the
\nceilings on overseas borrowings by commercial banks were set as
\nfollows: $1.33 billion (actually borrowed: $1.33 billion) in
\n1993\/1994; $1.23 billion (actual $1.8 billion) in 1994\/1995 and
\n$1.27 billion in 1995\/1996 (actual as of August $440 million).<\/p>\n
Soedradjad added that, as a result of the improvement of
\nIndonesia's credit rating in the international market from BBB-
\nto BBB, the terms of loans obtained by Indonesian banks have also
\nimproved.<\/p>\n
For example, the interest rates on overseas borrowings paid by
\nIndonesian state banks in 1992\/1993 floated at 1.5 percentage
\npoints above the London Inter-Bank Offered Rate (LIBOR). In
\n1995\/1996 the interest rates declined to 0.9 percentage points
\nabove LIBOR.<\/p>\n
The interest rates on borrowings by private banks floated at
\n2.5 percentage point above LIBOR in 1992-1993 but they decreased
\nto 1.5 percentage point above LIBOR in 1995-1996.<\/p>\n
Meanwhile, Hendrobudiyanto, a director of the central bank,
\ndisclosed yesterday that bad loans at Indonesia's commercial
\nbanks decreased slightly to 4.16 percent of outstanding credits
\nas of last June, from 4.24 percent last April and 3.34 percent in
\nDec. 1993.<\/p>\n
According to the central bank's weekly report dated Aug. 15,
\ncommercial banks' credits, including foreign exchange credits,
\nstood at Rp 207.2 trillion (US$91.1 billion) as of last June.<\/p>\n
Hendro said the collectibility rate of loans provided by
\ncommercial banks increased to 88.37 percent of their outstanding
\ncredits as of last June, from 87.77 percent last April and 85.83
\npercent in Dec. 1993. (kod\/rid)<\/p>",
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