Balance of payments manageable

JAKARTA (JP): The central bank, Bank Indonesia, is confident this year's general election and next year's presidential election will not put much pressure on the country's balance of payments.

Bank Indonesia's Governor, J. Soedradjad Djiwandono, said yesterday the international financial community shared the central bank's confidence in Indonesia's balance of payments position.

"As we are facing a parliamentary election in May and the presidential election in March 1998, Indonesia may become the focus of attention for the international financial community," Soedradjad said after the signing of a US$500 million standby loan agreement.

"However, we are confident that with our sound macroeconomic management and policy stability, we will be able to sustain the strong growth and prosperity we have enjoyed over the past decades," he said.

A syndication of 40 banks from Asia, Australia, Europe and North America agreed Monday to provide Indonesia with a $500 million standby loan.

The $500 million standby facility was secured to keep the level of the central bank's standby loans at $2 billion.

The loan, one of a series signed by the central bank since 1984, was arranged by Commerzbank (South East Asia) Ltd, The Fuji Bank Ltd, Industrial Bank of Japan Asia Ltd, JP Morgan Securities Asia Ltd, NatWest Markets, Sanwa International Finance Ltd and Tokyo-Mitsubishi International (HK) Ltd.

The facility has an eight-year tenure with bullet repayments and will be fully revolving.

The loan carries an annual interest rate 0.625 percent above the London Inter-Bank Offered Rate. It also carries a 0.3125 percent yearly commitment fee and a 0.65 percent upfront management fee.

Bank Indonesia said the facility's favorable terms and conditions could be interpreted as a vote of confidence by the international financial community in Indonesia's economy and the government's policy.

Standby facilities are used as a cushion to cope with currency speculations and sudden capital outflows.

Bank Indonesia's managing director, Paul Soetopo Tjokronegoro, said the central bank had rarely used the standby loans to curb speculative attacks on Indonesia's currency.

In the past any disbursements of standby loans were used to finance mostly government projects needing imported materials, Paul said.

As of last December, Bank Indonesia had disbursed $1 billion from its standby facilities.

Soedradjad said international investors' confidence in Indonesia could be seen in the $29.9 billion of foreign direct investment commitments licensed last year.

At the end of last month Bank Indonesia's foreign exchange reserves stood at $19.8 billion; sufficient for five months of non-oil imports.

The government predicts Indonesia's current account deficit will increase from $7 billion last fiscal year to $8.8 billion this fiscal year.

The standby facility is also meant to serve as a benchmark to help the business community get offshore loans on more favorable terms.

"Over the years, it has been our objective to gradually improve the terms of these facilities -- both with respect to maturity and cost -- and to establish a benchmark for other Indonesian borrowers, both state-related and private sector," Soedradjad said.

Last July Bank Indonesia established another benchmark by issuing $400 million in Yankee Bonds on the United States capital market.

Indonesia's Baa/BBB-rated 10-year bonds were priced 100 basis points above U.S. treasury bills.

"We intend to continue this policy of diversification and the establishment of benchmarks in the major capital markets to benefit all Indonesian borrowers," Soedradjad said. (rid)

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