Govt sees debt service ratio up to 49.3 percent

Govt sees debt service ratio up to 49.3 percent

JAKARTA (JP): The government expects the ratio of serviced
foreign debt to exports to reach an alarming level of 49.3
percent in the current fiscal year that ends in March, Minister
of Finance Bambang Subianto said on Tuesday.

"Our debt service ratio in the 1998/1999 fiscal year is
estimated at 49.3 percent," Bambang said in a written reply to a
question posed by legislator Thomas Suyatno.

The response was distributed during a hearing between the
finance minister and the House of Representatives' Commission
VIII for finance and the state budget.

The figure was based on forecasts on the principal and
interest payment of the sovereign and private debt amounting to
US$27.19 billion this year and the total predicted export
earnings of $55.16 billion

This estimate was higher than the government's earlier
projection.

In September, Coordinating Minister for the Economy, Finance
and Industry Ginandjar Kartasasmita said the government saw the
debt service ratio for the current fiscal year at 44 percent.

Before the economic crisis, which has seen the rupiah sink by
more than 60 percent in value against the U.S. dollar since July
1997, the country's debt service ratio stood below 35 percent.

Thomas said the government should boost exports to bring down
the debt service ratio.

Increasing exports is one of the only two approaches the
government could take in response to the alarming debt level. The
other is delaying the debt repayment.

"I don't think the government would delay the debt repayment,
it would rather boost exports," he said.

At a hearing with the commission on Monday, the director
general of budget affairs at the Ministry of Finance, Darsjah,
said the government would not write off its sovereign loans, to
maintain healthy relations with the country's foreign debtors.

"We have not considered a debt write-off... if we did, we
would risk having the loans for our ongoing projects stopped,"
Darsjah said.

This means boosting exports is the only way to reduce the debt
service ratio.

Indonesia has not benefited from higher export revenues this
year because of trade financing troubles, despite the rupiah's
significant plunge which normally would make exports more
competitive.

Export-oriented firms, especially those highly reliant on
imported materials, have been facing difficulties securing
letters of credit to import raw materials because of the low
confidence in the local banks.

The rupiah's sharp depreciation has also boosted the prices of
imported products.

The government has pledged to help export-oriented firms by
establishing an Export Financing Institution to handle all issues
regarding trade financing.

According to official data, total exports reached $37.24
billion during the January-September period, a 5.73 percent
decline from the same period of 1997. The drop was mainly in the
oil and gas sector, as non-oil exports rose slightly, by 1.5
percent.

Imports dropped even more, by 36.6 percent, during the period
to $20.15 billion, resulting from a sharp fall in oil and gas
imports. (das)