Govt to curb foreign loans

Govt to curb foreign loans

JAKARTA (JP): Minister of Finance Mar'ie Muhammad told the
private sector yesterday it must curb the inflow of offshore
borrowing because the government is considering revising the
existing ceiling for foreign loans.

"As a member of the monetary authority, I am sternly stating
that the private sector must improve the management of their
foreign loans and refrain as much as possible from excessive
amounts of borrowing in order not to put the country's economy at
high risk," Mar'ie told members of the Indonesian Chamber of
Commerce and Industry here yesterday.

The Chamber's members met with more than a dozen ministers led
by Coordinating Minister for Economy and Finance Saleh Afiff in a
briefing on the government's draft budget yesterday.

The draft budget was proposed earlier yesterday by President
Soeharto before a plenary session of the House of
Representatives.

Mar'ie said that the government needs the involvement of the
private sector to advance the country's development. "But, it is
our main job to remind them of the borrowing risk due to a
possible mismanagement of commercial loans," he said.

"I even urge Bank Indonesia, the central bank, to impose
strict measures against the domestic borrowers who have failed to
submit reports on the development of their commercial loans to
the central bank," he said.

Mar'ie did not specify the current position of the private
sector's outstanding foreign debt. But, he announced last
December that the private sector's foreign debt had reached US$36
billion as of the end of September, as compared to $29.54 billion
as of June.

He told a hearing with the House's budgetary commission in
December that the private sector's debts increased by $6.8
billion during the period between July and September of last
year, while the government's outstanding borrowing fell by almost
$3 billion during the same period.

According to Mar'ie, that the country's total foreign debt
stood at $93 billion as of September, of which $56.66 billion was
owed by the government and the remaining $36 billion by the
private sector.

Governor of Bank Indonesia Soedradjad Djiwandono said
yesterday that he was committed to strengthening its control over
the private sector's foreign debt, considering that the sector is
expected to be the backbone of the country's development in the
future.

Strict control of commercial loans is essential to maintain
the country's balance of payments at a safe level, he said.

Ceiling

Mar'ie also said yesterday that the monetary authority is now
considering revising the country's existing ceiling on offshore
loans. He would not yet reveal any details of the planned
revision of the ceiling.

The government has thus far set the ceiling on offshore
commercial loans at between $5.6 billion and $6.5 billion. This
policy is to remain in effect until next fiscal year. The annual
ceilings on foreign loans to the central bank, state banks and
private banks are set at $500 million, $1 billion and $500
million, respectively.

With the existing ceilings, private companies are permitted to
borrow up to $2.8 billion from foreign creditors in the current
fiscal year and up to $2.9 billion in the next fiscal year, while
state firms may borrow up to $1.4 billion in 1994-95 and up to
$1.6 billion in the next fiscal year.

The Chamber's chairman, Aburizal Bakrie, told reporters after
yesterday's meeting he was optimistic that the private sector is
now able to manage its offshore borrowing under a prudential
principle scheme.

"I am personally not worried about the increase in the private
sector's foreign loans because our debt service ratio is quite
good," he said.

Hadi Soesastro, an executive director of the Center for
Strategic and International Studies, suggested yesterday that it
is better for the government to realign its monetary policies,
including those related to the development of the country's
interest rates and rupiah convertibility. He also advised that
the governemnt tighten its control of inflationary factors,
instead of wasting time managing the private sector's foreign
borrowing.(fhp/hdj)