BI sees stronger rupiah on Paris Club debt restructuring deal
The Jakarta Post, Jakarta
Bank Indonesia said the rupiah would strengthen if creditor nations under the Paris Club agreed to defer debts of some US$5.5 billion from Indonesia's state budget until the end of 2003.
"Paris Club, further steps in privatization and Bank Niaga," said Bank Indonesia governor Sjahril Sabirin when asked what would drive the rupiah higher in the coming days.
Indonesia will meet next week with its sovereign creditors in the Paris Club, to seek the rescheduling of $5.5 billion in debts maturing between April 2002 and December 2003.
Deferring payment on the debts would lift pressure on the rupiah, which despite recent gains remains vulnerable on high dollar demand to pay off corporate foreign debts.
The rupiah has advanced recently due in part to news that some creditors will support Indonesia's request to reschedule the debts during the meeting.
"If (Finance minister) Boediono showing optimism is enough to lift the rupiah, it will be even more so if it (a Paris Club deal) can be realized," Sjahril said.
Another factor behind the rupiah's recent gains is the sale of several state assets to foreign firms.
Further cementing confidence in the currency, the government said its privatization program won legislators' approval despite growing labor protests.
Twenty-five state firms, some of which analysts say are likely to attract foreign investors, are scheduled for privatization this year.
The privatization program has gained momentum since last year's sale of an 11.9 percent stake in local phone operator PT Telkom through the stock market to foreign investors.
Telkom's sale earned the government about $300 million, and enticed wary investors to reconsider buying Indonesian assets.
The government now plans to sell Bank Niaga in June, hoping to capitalize on the momentum of last month's sale of Bank Central Asia to a U.S. investment firm.
Recent sales of state assets also have improved Indonesia's chances of obtaining its next loan tranche worth $400 million from the International Monetary Fund.
The fund's board of executives will meet in mid-April to review the progress of Indonesia's economic reform, before deciding whether to approve the disbursement of the loan tranche.
A visiting member of the board indicated last week a loan disbursement could be imminent, helping to keep the market upbeat on the rupiah.
The local currency received another boost after Telkom announced on Wednesday it had sold a 12 percent stake in its cellular unit, PT Telkomsel, to Singapore Telecommunications Ltd. It said the sale was worth $429 million.
News of the deal spurred renewed dollar selling on Thursday, pushing the rupiah to end trading at 9,675 against the dollar from 9,800 in the previous day.