Indonesia forex reserves at safe level, BI says

Indonesia forex reserves at safe level, BI says

JAKARTA (JP): Bank Indonesia said on Wednesday that the
country's foreign exchange reserves would remain at a safe level
until the end of this year even after meeting dollar demands for
the repayment of corporate overseas debt.

Bank Indonesia senior deputy governor Anwar Nasution said that
forex gross reserves were estimated to increase to US$29.5
billion by the end of this year from $28.1 billion at the
beginning of this month.

He said that net international reserves (NIR) were estimated
to reach $18.1 billion.

"The figure meets the minimum safe level target of forex
reserves as agreed with the International Monetary Fund," Anwar
told the House of Representatives Commission IX on banking and
state budget at a meeting.

He said that the minimum NIR level set by the IMF was $15.7
billion.

Indonesia has some $150 billion in foreign debt including
around $70 billion owed by the private sector.

Demand for dollars will continue to increase as companies have
to service their foreign debt or repay the debt principal. The
availability of the forex is crucial to maintain domestic
financial stability, including the exchange rate of the rupiah
against the U.S. dollar.

Bank Indonesia said recently that private sector foreign debts
due in the fourth quarter of this year were estimated to reach
more than $9.2 billion.

But Bank Indonesia officials have said that the maturity of
such a huge amount of debt would not necessarily cause a sharp
increase in demand for dollars because the greater part of the
debt was owed by subsidiaries of foreign companies which would
supply the dollar needs.

Meanwhile, the rupiah fell to Rp 8,845 per dollar in late
trading on Wednesday, compared to Rp 8,825 previously as state-
owned banks bought dollars to repay foreign debt.

Dealers said state banks were buying dollars to repay offshore
obligations maturing at the end of the year.

They also said that local companies would soon go to the
market to purchase dollars to repay their foreign obligations.

Anwar attributed the increase in the forex reserves to higher
oil and gas revenues and new foreign borrowings (disbursement of
foreign loans) by the government.

The international oil price has increased from an average of
$17.40 per barrel last year to an average $26.90 per barrel this
year.

Anwar added that the increase in the forex reserves had
already to taken into account the payment of the government
foreign loans.

Elsewhere, Anwar said that economic growth in the fourth
quarter was expected to be higher than the previous quarters,
with growth throughout this year projected at 4-5 percent.

Anwar said that consumption will still be the main engine for
growth this year.

"But part of the growth will also be generated by the
continuing increase in investments, exports as well as the brisk
economic activity at the year's end due to the Christmas, Idul
Fitri and New Year festivities," Anwar said.

"Investments will continue to increase although it will not be
as high as in the previous quarters, and consumption will
continue to grow albeit at a slower pace," he added.

Anwar, however, said that inflation for this year was expected
to reach 8 percent compared to the previous forecast of between
5-7 percent.

He said that the higher inflation was primarily due to the
recent increase in domestic fuel prices by an average of 12
percent.

He said that the year-end festivities would also add to the
inflationary pressure.

He said that Bank Indonesia would maintain the benchmark
interest rate of the Bank Indonesia one-month SBI promissory
notes at 13-14 percent to help curb inflationary pressure.

The benchmark interest rate rose to 13.72 percent at
Wednesday's auction from 13.63 percent last week. (rei)