BI secures US$500m standby loan

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)