Firms must reschedule debt repayment: Expert

JAKARTA (JP): Companies which cannot repay their much inflated foreign debt because of the currency woes must collectively renegotiate the rescheduling of debt repayment with creditors, economist Christianto Wibisono said yesterday.

Christianto, chairman of the Indonesian Business Data Center, said this would help save many companies from defaulting on their loans, as the sharp depreciation of the rupiah against the U.S. dollar made loans unpayable.

The private sector could cooperate with the Indonesian Chamber of Commerce and Industry, for example, to strengthen their position to negotiate on the roll-over requirement with foreign creditors, he said.

"The practice would just be like negotiating with a bank to settle a bad debt, except this would be done on an international scale," he said.

He said the currency crisis was a borderless issue and had turned into an international crisis.

Attacks on Southeast Asian currencies this week have been the most powerful since the currencies buckled under massive selling just after the de facto devaluation of the Thai baht on July 2.

Thailand was forced to allow its currency to slide against the dollar, unleashing the world's worst financial storm since Mexico's near-collapse in 1995.

The floating of the baht followed an effective devaluation of the Philippine peso, Malaysia's costly but failed defense of the ringgit and Indonesia's removal of a regime that kept its rupiah within a band against the greenback.

The free floating of currencies had already immensely eroded their value against the dollar.

The rupiah has declined by over 40 percent against the dollar since early July.

Dealers and monetary authorities have said the persistent weakening of the rupiah was partly caused by the high demand for dollars from local companies to refinance their dollar- denominated debt.

Government data shows that offshore loans owed by the private sector as of March this year reached US$52.47 billion, while that of state-owned companies reached $3.64 billion. The data does not say when the debts are due.

Hamzah Haz, a member of the House of Representatives, urged the government yesterday to help highly indebted companies to settle their offshore loans.

He said the sharp depreciation of the rupiah against the dollar had sharply increased the amount of their loans in terms of rupiah.

"This issue must be taken with serious care because the rupiah's depreciation was totally unexpected," Hamzah, the chairman of the United Development Party faction in the House, was quoted by Antara as saying yesterday.

The rush for dollars made by local companies to repay their offshore loans had partly caused the continued drop in the rupiah, he said.

"This psychologically affects people, who then join the rush, and triggers the rise of the dollar even more," he said.

Christianto said the depreciation was even worse than when the rupiah was last devalued in 1986.

The depreciation of the rupiah was worse than that of the Thai baht, which started the currency crisis in the region, he said.

"Everything has been worsened by the panic sentiment to buy or keep dollars, which surpasses even a market or economic explanation," Christianto said. (das)