Indonesia to enjoy $1b in balance of payments
JAKARTA (JP): Indonesia, despite a loss in investors' confidence in its economy, expects to enjoy a surplus of US$1.07 billion in the 1998/1999 balance of payments.
However, the surplus would come mainly from the staggering official capital inflows, in the form of foreign debts, rather than from private capital inflows, according to government estimates.
Boediono, a director at Bank Indonesia, the central bank, predicted Indonesia's capital accounts would record a surplus of $6.47 billion this fiscal year.
The surplus would cover the country's current account deficit, which was estimated to decrease to $5.39 billion from $6.34 billion in the current fiscal year.
"Therefore, by March 1999, the end of next fiscal year, our foreign exchange reserves will increase by $1.07 billion," Boediono said.
The central bank said recently the country's foreign exchange reserves totaled about $20 billion, enough to finance five months of imports.
Boediono acknowledged that most capital inflows would come from public sector debts, which would be $9.05 billion in 1998/1999.
That would include $2.4 billion in balance of payment support from the International Monetary Fund, $1.4 billion fast- disbursing foreign loans and $5.25 billion in project loans from countries grouped in the Consultative Group for Indonesia.
Boediono said private sector capital would not reenter Indonesia until the second half of next fiscal year, or by the end of 1998.
Nevertheless, he said the government expected private capital inflows would be $2.2 billion next fiscal year, down from $3.17 billion in the current fiscal year and $13.49 billion in 1996/1997.
The government and the private sector would spend $4.7 billion to pay for the amortization of their foreign loans for 1998/1999, down from $4.88 billion this fiscal year and $6.1 billion last fiscal year.
In the trade sector, the government expected exports to grow 8.9 percent to $59.48 billion next fiscal year from $54.6 billion this fiscal year. Non-oil exports would grow 13 percent to $49.2 billion from $43.58 billion.
Minister of Industry and Trade Tunky Ariwibowo said he was optimistic exports would grow even more, considering Indonesia's exports would now be more competitive due to the weakened rupiah.
He said imports would increase 4.3 percent to $48 billion next fiscal year from $45.9 billion this fiscal year. Non-oil imports would grow 6 percent to $44.68 billion from $42.15 billion.
Therefore, the government expected that Indonesia would book a surplus of $11.42 billion.
But surplus in trade would be undermined by a large deficit in services, which was expected to expand to $16.8 billion from $14.99 billion this fiscal year.
The large difference between the deficit in services and surplus in trade would result in a deficit in the current account, which was expected to be $5.39 billion -- 2.6 percent of the country's gross domestic product.
"Based on the above figures, we can say that we are fundamentally okay. Then why does the rupiah fluctuate so wildly? I think it's driven more by psychological factors than fundamentals," Boediono said.
"I believe we can reach our target of Rp 4,000 per U.S. dollar provided that we take care of these psychological factors as our fundamentals are basically sound," he said. (rid)
Table: Indonesian balance of payments (US$ million)
1996-97 1997-98 1998-99
Description (actual) (estimate) (projection)
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1. Exports (FOB) 52,038 54,605 59,484
a. Oil 7,513 6,387 5,348
b. Liquefied natural gas 5,258 4,632 4,884
c. Non-oil and non-gas 39,267 43,586 49,252
2. Imports (FOB) -45,819 -45,957 -48,067
a. Oil -4,423 -3,533 -3,067
b. Liquefied natural gas -270 -271 -318
c. Non-oil and non-gas -41,126 -42,153 -44,682
3. Services -14,288 -14,990 -16,813
a. Oil -1,831 -2,087 -2,233
b. Liquefied natural gas -1,710 -2,316 -2,168
c. Non-oil and non-gas -10,747 -10,587 -12,412
4. Current account -8,069 -6,342 -5,396
a. Oil 1,259 767 48
b. Liquefied natural gas 3,278 2,045 2,398
c. Non-oil and non-gas -12,606 -9,154 -7,842
5. Special drawing rights 0 0 0
6. Official capital 5,298 13,147 9,051
a. Program aid 0 7,572 3,800
b. Project aid and others 5,298 5,575 5,251
7. Debt repayments (principal) -6,118 -4,884 -4,789
8. Other capital 13,488 3,169 2,210
9. Total (4 to 8) 4,599 5,090 1,076
10. Errors and omissions - 701 -4,615 0
11. Monetary movements -3,898 -475 -1.076
Note:
Current account against GDP (%) -3.5 -2.7 -2.6
Debt Service Ratio (%)
- Government 14.6 12.0 10.9
- National 34.2 37.7 37.4
Source: The Ministry of Finance