Bank Ekspor Impor acknowledges losses

JAKARTA (JP): State-owned Bank Ekspor Impor Indonesia (Bank Exim) acknowledged yesterday that it was facing large potential losses from its forward foreign exchange deals as a result of the rupiah's steep devaluation.

"But our unaudited financial report for 1997 still booked a gross (before-tax) profit of Rp 162 billion," Bank Exim president Kodradi said yesterday.

Kodradi was responding to a headline story in the latest issue of Kontan, an economic news weekly, which reported that Bank Exim could lose hundreds of millions dollars from its forward foreign exchange deals totaling US$2.2 billion as a result of the rupiah's 70 percent loss in value against the U.S. dollar.

The weekly reported that as of December, Bank Exim, up to then classified as the most sound state bank, had contracted to sell $2.2 billion at an exchange rate of Rp 2,725.

The rupiah rate has been hovering mostly between 8,000 and 10,000 to the dollar since January.

Kodradi said Bank Exim's actual losses could not yet be estimated in view of the wild volatility of the rupiah rate.

"We continue to operate normally and we are able to meet all of our obligations," he added.

Kontan estimated that at a rate of Rp 2,500 to the dollar, the bank's exposure to the foreign exchange market had reached 15 times as large as its capital of Rp 1.5 trillion, far exceeding the 25 percent maximum net open position allowed by the central bank.

Kodradi blamed the losses to the government's decision last August to free float the rupiah which eventually set off a massive scramble for dollars.

"This is a force majeure," he said, adding that he had asked the government to allow the bank to carry over the foreign exchange losses for five years.

Informed sources confirmed that Bank Exim had asked permission from the finance minister to amortize its foreign exchange losses over five years.

Bank Exim director Irvan Prawiranata, while acknowledging losses inflicted in the bank's foreign exchange deals, denied that the losses had been as big as reported by the newspaper.

"We have been lulled by the average 5 percent depreciation of the rupiah against the U.S. dollar over the past 10 years," Prawiranata told Kontan in defending the bank's foreign exchange deal.

"In an emergency situation, we can no longer talk in theory. The top priority is how we can survive," Irvan said in reply to questions as to why Bank Exim exceeded the maximum net open position. (vin)