Bakrie wants BI to give loans in U.S. dollar

JAKARTA (JP): The Indonesian Chamber of Commerce and Industry (Kadin) has appealed to Bank Indonesia, the central bank, to provide U.S. dollar-denominated loans to help local companies pay off their offshore debts.

The chamber's chairman, Aburizal Bakrie, said yesterday that dollar loans were essential given the shortage of greenback supply in the market.

Aburizal, popularly called Ical, said such loans would automatically reduce the dollar rush, which had mounted in the last several weeks as both local and foreign companies dumped their rupiah in fear that the currency would continue sliding.

The lending facility would also help restore public trust in the rupiah, which had lost about 35 percent of its value against the greenback in the last several months, he said.

"Bank Indonesia could give the loans to private companies in dire need of the dollar and, in return, the companies should keep their money in the central bank," Ical told journalists.

The loans could be given for a three to six-month term with interest rates of about 9 percent to 10 percent, according to the market, he said.

Funds for the loans could be taken from the central bank's foreign exchange reserves, or from the expected aid from the International Monetary Fund (IMF), he said.

The government announced Wednesday it had decided to look for long-term support funding from international agencies, including the IMF, to guarantee the backup of foreign-exchange reserves.

At the same time, Ical urged the government to "force" exporters to sell their foreign currencies to the central bank, with a guarantee that they would be able to buy them back in forward trading.

"Bank Indonesia began providing swap facilities to registered export companies last week. But no companies would unload their dollars for fear that the rupiah would further decline, unless they are required to do so," he said.

To reassure that the rupiah will stabilize and to regain public confidence, the private sector needs to participate with the government, he said.

The rupiah plunged to historic lows last week before the central bank announced Saturday it had reopened its swap facility to registered exporters to ease the dollar rush in the money market.

Exporters, under the new swap facility, can buy dollars from the central bank through forward trading. The transactions with the central bank theoretically add to the dollar supply.

The central bank partly blamed the fall in the rupiah on local companies' high demand for the U.S. dollar to either pay off their offshore loans or pay for imports.

Ical also suggested yesterday the establishment of a task force, comprising government officials and business executives to monitor the affect of the crises on the private sector.

Such a task force would listen to problems encountered by the business sector during financial troubles such as the current one, and would monitor the sector especially in the next three to six months when many commercial papers and loans were due.

Ical urged the government to introduce a requirement that all business transactions in the country were to be made in rupiah instead of U.S. dollars.

"If domestic transactions are conducted in rupiah, like Malaysia does with the ringgit, Singapore with their dollar, and Thailand with the baht, there would be more confidence in our own currency," he said.

Many Indonesian big companies have been severely affected by the currency crisis due to their high exposure on short-term foreign loans, while most of their earnings were in rupiah.

The sharp depreciation of the rupiah against the U.S. dollar has sharply raised their offshore financial obligations. (das)