Goldman Sachs sees no debt moratorium

Goldman Sachs sees no debt moratorium

SINGAPORE (Reuters): Indonesia is unlikely to impose a debt moratorium or capital controls, Goldman Sachs economist Don Hanna said on Thursday.

Hanna, who had just flown in from Indonesia, told a Singapore investment conference the Jakarta government could come up with a "subsidized exchange rate" for companies to help them cope with their external debt repayments.

Indonesian corporate foreign debt is estimated at around $66 billion.

Some companies have started paying dollar-denominated debts in rupiah and their creditors are immediately offloading the currency, trapping it in a downward spiral.

The rupiah sank to 15,000 to the U.S. dollar in early Singapore trade Thursday -- down a massive 84 percent since it was at 2,400 last July before Asia's currency crisis swept the region.

Hanna said the markets should soon have a better understanding of how Indonesia planned to deal with its corporate external debt.

Banking sources in Indonesia said the government and the International Monetary Fund, which put together a $43 billion rescue package for the country, were looking at ways to deal with the private sector debt problem.

Hanna also said the situation in Indonesia would remain quite volatile in the coming weeks, especially after next week's Eid al-Fitr holidays, which mark the end of the holy Islamic fasting month of Ramadan, in mainly Moslem Indonesia.

Companies were expected to close for the holidays and many may not open afterwards and that could trigger worker unrest, he said.

Because Indonesia's crisis is largely a domestic issue, the implications of a spill-over into the region were likely to be small, he said.

This was reflected in the relatively small falls in other currencies like the Philippines peso and the Thai baht compared with the 20 percent fluctuations seen in the rupiah, he said.