BI secures US$500m standby loan

JAKARTA (JP): The central bank, Bank Indonesia, has secured a standby loan worth US$500 million from a syndication of 40 major banks from Asia, Europe, Australia and the United States.

Bank Indonesia's governor, J. Soedradjad Djiwandono, said yesterday the loan would be used to back up the country's balance of payments.

Despite Indonesia's increasing foreign exchange reserves it still needed standby loan facilities to enable it to curb the negative impact of the globalization on the world's financial markets, Soedradjad said.

"Besides that we need a cushion and that is this standby loan," Soedradjad said.

The coordinating arrangers include Commerzbank Aktiengesells Chaft, Fuji Bank Ltd, JP Morgan, Sanwa Bank Ltd. and the Bank of Tokyo Mitsubishi Ltd.

The loan agreement will be signed today by executives of the 40 banks and Bank Indonesia.

Soedradjad said the central bank had to secure the new standby loan to keep the level of its standby loans at $2 billion.

About $500 million of the old standby loans had matured so the central bank needed to secure a similar amount.

Soedradjad said the facility would mature in eight years and be structured as revolving credit throughout its life.

He said the central bank would draw on the loan only if necessary.

But it is not yet clear how much the interest margin and upfront fees will cost.

Cushion from standby loans is necessary for countries with large current account deficits like Indonesia to curb speculative attacks on their currencies.

The government projects a current account deficit of $8.8 billion this fiscal year from $7 billion last fiscal year.

The deficit is expected to expand to $9.8 billion next fiscal year, or 4 percent of gross domestic product.

Indonesia has been able to finance its current account deficits from capital inflows and can maintain its foreign exchange reserves at a healthy level of about five months of imports.

The central bank projects its foreign exchange reserves will reach $19.1 billion this fiscal year and just over $20 billion next fiscal year -- enough for 4.7 months of imports.

Soedradjad said the standby loan, one of a series the central bank has signed since 1984, was one of the bank's monetary tools to back up its foreign reserves.

Early last year, the central bank signed in Singapore $500 million in standby loans with a syndication of 44 major banks.

The loans carried an annual interest rate of 0.625 of a percent above the London Inter-bank Offered Rates, with a commitment fee of 0.31 percent per annum.

Soedradjad said the central bank had also signed bilateral cooperation agreements with central banks in several Asia-Pacific countries to cushion possible massive foreign currency outflows.

The most recent deals were the repurchase agreements with six Asian and Australian central banks.

The agreements enable each central bank in the region to sell their U.S. dollar-denominated treasury notes to their counterparts for fresh cash on a repurchase basis. (rid)