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.