Govt to speed up repayment of loans with rates over 10%
JAKARTA (JP): Minister of Finance Mar'ie Muhammad said yesterday that the government plans to speed up the payment of foreign debts with annual interest rates between nine and 10 percent beginning next fiscal year.
The minister said that the plan is the second step of the government's program to speed up the payment of high interest- loans.
"We are paying off all foreign loans with annual interest rates of 11 percent and above this fiscal year. After this, we will focus on the prepayment of loans with interest rates of between 9 percent and 10 percent in the following year," he said during a hearing with House of Representatives Commission VII for finance, banking, trade and cooperatives.
In the routine hearing, the minister said that the program to speed up the payment of high interest loans, which started in 1994/95, was one of the government's measures to reduce its debt burdens.
In 1994/95, the government prepaid foreign loans worth $782.9 million with proceeds from the divestment of its shares in state- owned PT Indosat, which listed its stocks on the New York and Jakarta stock exchanges in 1995.
In 1994/95 the government used the proceeds from the privatization of state-owned PT Telkom and PT Tambang Timah to finance the prepayment of high-interest loans worth $711.9 million, he said.
The minister said that in this fiscal year until March 1997, the government will use its budget surplus to pay off another $578.9 million worth of high-interest loans.
Total prepayment
"That prepayment will bring the total amount of high-interest loans to be paid by the government to $2.07 billion since 1994/95," he said.
According to Bank Indonesia, the government's outstanding foreign loans declined to $58.2 billion as of the end of 1995/96 from $62.6 billion in the previous year mostly because of the appreciation of the U.S. dollar against the Japanese yen.
Most of the external debts were categorized as concessional loans, carrying annual interest rates of less than 3 percent per annum.
Mar'ie said that around 4 percent of the total were commercial loans, carrying interest rates of more than 6 percent per annum.
The minister told the House members that the prepayment of foreign loans with interest rates of between 9 percent and 10 percent will be financed with proceeds from the privatization of state-owned companies and state budget surpluses.
The government is currently preparing the privatization of a number of state-owned companies, including Bank Negara Indonesia 1946, subsidiaries of electricity company PLN, toll road operator PT Jasa Marga, steel company PT Krakatau Steel and national flag carrier Garuda Indonesia.
Asked about the government's program to curb the country's widening current account deficit, Mar'ie said that the only way is to promote exports.
"Curbing imports is the most difficult one," he said. "The reintroduction of a controlled foreign exchange regime might be effective, but such a measure is out of the question because it will cause more harm than good."
The government has, since the late 1960s, applied a free foreign exchange regime in its monetary policy and, as a consequence, cannot directly control the funds flowing into and out of the country.
The current account deficit is expected to grow to $8.7 billion in the 1996/97 fiscal year, up significantly from $6.9 billion in the previous year. (hen)