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.