BI secures US$500 million in standby loans
BI secures US$500 million in standby loans
By Hendarsyah Tarmizi
SINGAPORE (JP): A syndication of 44 major banks committed themselves yesterday to providing Bank Indonesia with US$500 million in fresh standby loans with a maturity of eight years.
The loans, carrying an annual interest rate of 0.625 of a percent above the London Inter-bank Offered Rates, will be used by the Indonesian central bank to back up the country's balance of payments.
Bank Indonesia's managing director for foreign affairs, Paul Sutopo, said that the loan facility would be cashed only if the central bank feels it necessary.
The loans would carry a commitment fee of 0.31 percent per annum.
"The standby loan is one of Bank Indonesia's monetary tools to back up its foreign reserves," he told journalists following the signing of the standby loan commitment.
The loans, one of a series signed by the central bank since 1984, were arranged by six major banks, including Banque Nationale de Paris, Chase Manhattan, DKB Asia Limited, and Dresdner (South East Asia Limited). The loan facility is also supported by 38 other major banks.
Sutopo said the number of banks taking part in the new standby loan facility is much bigger than last year, reflecting improved international support for Indonesia.
"The interest rate of the new standby facility is similar to that on the previous loans," he said. "But overall, the terms and conditions of this new facility are much more flexible."
Sutopo said that the central bank had to secure the new standby loans to maintain the level of its standby loans at $2 billion.
"About $500 million of the old standby loans have matured and we, therefore, needed to secure a similar amount of new standby loans," Sutopo said.
The central bank began using a standby loan facility in 1984 as a debt instrument to support the country's balance of payments. The loans have been gradually increased to the $2- billion level.
Such a debt instrument is essential to enable Indonesia to curb the negative impact of the globalization of the world's financial markets.
"The globalization of the world's financial sector does not only mean an increase in the inflows of much needed capital but also means highly-disruptive capital outflows," he said.
In addition to the standby loan facilities, Bank Indonesia has also signed agreements on bilateral cooperation with central banks and monetary authorities in Asia and Australia to cushion possible massive outflows of foreign funds.
The most recent deals were the repurchase (repo) agreements with six Asian and Australian central banks.
Sutopo said the repo agreements will enable each central bank in the region to sell their U.S. dollar-denominated treasury notes to their counterparts for fresh cash under a repurchase basis.
"These agreements have been aimed at enhancing regional stability -- not by attempting to eliminate speculation all together but rather to make speculation a more lose-lose situation," he explained.
The so-called repo deals were signed following massive withdrawals of short-term foreign funds from Mexico in December, 1994.
Mexico fell into economic chaos after devaluing the peso in December 1994 during a balance of payments crisis. The crisis triggered fears of similar devaluations in Asia, with the Thai baht, the Hong Kong dollar, the Philippine peso and the Indonesian rupiah coming under speculative attacks due to the domino affect of the Mexican tragedy.
According to JP Morgan's commercial banking subsidiary, Morgan Guaranty, Indonesia's latest economic indicators have proved better than expected.
The closely-watched trade balance came firmly into the black at $847.5 million in February, the fifth consecutive month of strong showings in excess of $500 million, the bank said.
The country's official foreign exchange reserves climbed steadily from $14.2 billion as of last October to $16 billion at the end of April.