Indonesia will not use foreign exchange reserves
Indonesia will not use foreign exchange reserves
JAKARTA (JP): Governor of Bank Indonesia (the central bank)
Soedradjad Djiwandono stated yesterday that Indonesia will not
resort to using its foreign exchange reserves to cover its
current account deficit -- expected to reach US$7.9 billion this
year.
Speaking at a budget briefing for the press on Wednesday
night, the governor said that the deficit can still be offset by
official and private capital flows.
"Official capital flows are estimated at US$5.7 billion and
private capital flows at US$10.6 billion. So our capital account
will still be in surplus," he said, adding that the US$10.6
billion capital flows will be in the form of direct investments
portfolio capital.
Besides, he said, Indonesia also has a stand-by loan of US$2
billion that can be taken at any time needed.
"So we don't need to use our foreign exchange reserve to
finance our imports," he stressed, at the briefing, which was
attended by a number of ministers.
According to the governor, Indonesia's foreign exchange
reserve is now recorded at US$14.5 billion or equivalent to
between four and five months of imports.
He pointed out that the foreign exchange holding will not
decrease during the current fiscal year even though the country's
foreign debt payments will reach US$6.05 billion, which is higher
than US$5.5 billion during the current fiscal year.
Indonesia has used part of the funds from the sales of its
state-owned companies' shares -- Telkom and Timah -- to
accelerate its foreign debt payments.
Indonesia's current account deficit could reach US$7.9 billion
or 3.8 of the gross domestic product (GDP) during the current
fiscal year (April 1995 to March 1996).
But during the next fiscal year, the deficit is expected to
decrease to US$6.9 billion or 3.1 of the GDP.
"To decrease the deficit, we should promote our non-oil
exports and reduce unnecessary imports," he said.
According to the governor, non-oil export growth during the
next fiscal year is estimated to reach 19.5 percent, while import
growth will be cut down to 11 percent.
"We're optimistic that we can reduce import growth from 32
percent during the current fiscal year to only 11 percent during
the next fiscal year. We know from experience that the government
can do it," he stated.
"Our debt service ratio (against exports) will decrease from
33.7 percent during the current fiscal year to 30.8 percent
during the next fiscal year," he said.
He added that the government will continue to pursue
prudential monetary and fiscal policies.
"The monetary authorities will strictly control offshore
loans, particularly in the private sector," he said.
The government recently issued a number of monetary policies
to cool down economic overheating. It increased banks' reserve
requirement from two to three percent, closed non-banking
financial institutions to new-comers, and tightened control over
their overseas borrowings. (13)