Donor countries urged to consider impact on yen rise

Donor countries urged to consider impact on yen rise

JAKARTA (JP): Indonesia has asked its multilateral creditors
to "consider" the impact of the ascent of the Japanese yen
against the U.S. dollar on its debt burden.

"The President has urged the Asian Development Bank and other
multilateral donors to consider the long-term effect of the
excessive appreciation of the yen against the U.S. dollar,"
Minister of Finance Mar'ie Muhammad told reporters after a
meeting with Soeharto yesterday.

Mar'ie accompanied Peter Sullivan, ADB's vice president for
the Far East, who was paying a courtesy call on President
Soeharto.

However, neither Mar'ie nor Sullivan explained, specifically,
what the President meant.

Soeharto said last week that the yen's recent surge against
the U.S dollar was no cause for panic because the Japanese
currency's sharp rise had been anticipated.

The dollar gained ground on the Tokyo foreign exchange market
yesterday, rising to 89.73 yen in afternoon trading from 88.75 on
Monday.

Concerns

Although Indonesia has never once rescheduled its foreign
debts since 1967, some analysts have expressed concern about the
rising Japanese currency because, they say, every time the yen
goes up by one percent against the dollar, it adds $300 million
or more to Indonesia's debts.

The Japanese government, the biggest provider of loans to
Indonesia, said two weeks ago that it had no remedy for the
heavier debt burdens that the yen's sharp rise has inflicted upon
its debtors.

According to official figures, Indonesia's foreign loans, most
of which are long-term government borrowings, total around US$88
billion. About 40 percent of these loans are denominated in yen,
with annual interest rates of between two-and-a-half and three
percent.

About 15 percent of the country's 1995-1996 state budget,
effective from next month, will be financed by foreign loans.

Mar'ie said last week that the government planned to increase
the proportion of yen in Indonesia's foreign exchange reserves
(about $13 billion) from the present level of 35 percent.

Only two years ago, yen reserves comprised only 27 percent of
the total foreign reserves.

Mar'ie said last week that the government would "try to lobby"
multilateral agencies, including the ADB, whose loans were
sometimes partly yen-denominated, to denominate all their loans
in U.S dollars.

Sullivan declined yesterday to answer the question: Had he
discussed with the President a concrete solution to Indonesia's
rising yen problem?

Projects

In the House of Representatives several suggestions have been
made concerning the phenomenon of the yen's appreciation,
commonly referred to using the Japanese word yendaka.

The chairman of the United Development Party faction, Hamzah
Haz, said yesterday that the yendaka might force the government
to spend less on government projects so that it could concentrate
its resources on dealing with problems caused by the rising
Japanese currency.

On Monday, Ni Gusti Ayu Eka Sukmadewi of the Indonesian
Democratic Party told the Minister of Finance during a budgetary
hearing that the government "should postpone the implementation
of less important projects."

Neither politician specified which projects should be
postponed.(hdj)