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)