Indonesia makes new repayment pledge

Indonesia makes new repayment pledge

WASHINGTON (Reuters): A much more formal pledge by Indonesia
that loans under the USDA's agricultural export credit program
will be repaid could lead to increased U.S. farm exports, a key
U.S. Agriculture Department aide said Tuesday.

"I'm hopeful... that this will give U.S. banks a little more
confidence in taking their share of the risk associated with
Indonesia business and -- on that basis -- we will see a pickup in
activity," USDA General Sales Manager Chris Goldthwait told
Reuters.

For some time, the Indonesian government has given its
"implicit guarantee" that loans made by banks to Indonesian
exporters under the export credit program will be repaid.

But just last week, USDA and Indonesian officials completed
work on putting that pledge into writing.

"Now, we have much more specific documentation, a much more
formal sovereign guarantee" from Indonesia, similar to what the
USDA has had for several months from the government of South
Korea, Goldthwait said.

As of April 10, exporters had used just a little more than 10
percent of a $400 million USDA export credit guarantee package
for Indonesia in fiscal 1998, which ends September 30.

USDA guarantees all but a fraction of the principal and
interest on loans under the GSM-102 program. Nevertheless, banks
could still face sizable losses if Indonesia importers were to
default on its payments.

Hopefully, Indonesia's formal sovereign guarantee will give
U.S. banks "an additional measure of confidence" in making loans
to Indonesian buyers, Goldthwait said.