BI calm about yen surge
BI calm about yen surge
JAKARTA (JP): Bank Indonesia Governor J. Soedradjad Djiwandono
said yesterday that the yen's surge would not have an adverse
impact on the Indonesian economy, even though nearly 40 percent
of the country's external debts is denominated in the Japanese
currency.
"The government has acknowledged several times that any
increase in the yen rate will have a potentially negative effect
on the country's outstanding debts. But the real impact is not as
big as feared by some analysts," the central bank's governor told
a press briefing.
Soedradjad said that the surge in the value of the yen or any
other major currency could theoretically affect the country's
foreign loans. The real impact of the appreciation on the debt
service burden, however, depends on the rates effective during
the repayment period.
"From that standpoint, the people should not have been shocked
by the yen's appreciation over the last few days. The real impact
will be felt only during the loan repayment period," he said.
Soedradjad cautioned that simply calculating the impact of
the yen's surge into the total value of the country's loans is
not accurate since the rate of the yen is constantly fluctuating.
"Moreover," he stressed, "the loan repayment of the foreign
debts is made on a year-to-year basis."
The dollar tumbled below the psychologically important 90-yen
level to its post-war low of 89.65 yen and 1.3690 marks in Tokyo
Wednesday before climbing back to 90 and 91 in the last two days.
Soedradjad admitted that the yen's surge had fueled a dollar
rush in the local money market mid-week as fund managers and
other speculators tried to benefit from the uncertainty. "The
central bank was forced to intervene into the market by selling
the dollar to stabilize the rupiah," he added.
On Wednesday several speculators dumped their rupiah and
bought the greenback on worries that the yen's surge might hurt
the Indonesian economy.
Earlier in January, the local money market was also feeling
the pressure as fund managers dumped their rupiah in the wake of
the Mexican financial crisis. Speculators feared that a similar
crisis would also take place in Indonesia.
The central bank governor blamed the fresh dollar rush on the
speculative trading of foreign fund managers.
"The people seemed shocked. It was as if the surge in the
yen's value was the end of the day. It's not right," he said of
the people's jitters.
Besides, he added, most of the country's external debts are
based on long-term contracts and their service and installment
payments are made on an annual basis.
"So there is no reason to worry about the appreciation of yen.
In fact, it is now stabilizing," he said.
According to the central bank governor, any analysis should be
based on the government's ability to service and install its
debts this year.
"From this standpoint, the position of our foreign reserves
are safe, more than enough to cover five months of imports," he
added.
Soedradjad said that around 35 percent of the US$12.97 billion
foreign reserves held by the central bank is kept in Japanese yen
accounts.
The proportion of yen holdings in the total international
reserves is comfortable enough to service and install the yen-
denominated debts," he said.
Soedradjad added that the percentage of yen in the reserves
would be increased to anticipate a future surge in the yen.
Minister of Finance Mar'ie Muhammad announced recently that
the country's outstanding debts totaled $87.6 billion as of last
December, of which $58.6 billion were owed by the government, $24
billion by private borrowers and $5 billion by state companies.
The government allocated around Rp 17.65 trillion ($8.2
billion) of the 1994-1995 state budget for debt servicing and
installments and another Rp 17.89 trillion ($8.32 billion) from
the 1995-1996 budget.
Debt servicing and installments account for around 23 percent
of the Rp 78.02 trillion in spending projected in the next fiscal
year, which begins next month. (hen)