Balance of payments manageable

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)

Editorial -- Page 4