Japan to help deal with currency woes
Japan to help deal with currency woes
JAKARTA (JP): Japan's Vice Finance Minister for International
Affairs Eisuke Sakakibara said here yesterday that the Japanese
government was ready to help Indonesia cope with its currency
crisis.
"The Japanese government stands solidly behind Indonesia...
and is ready to extend bilateral financial or technical
assistance to the country," Sakakibara said following a meeting
with Bank Indonesia Governor J. Soedradjad Djiwandono.
Sakakibara said Japan would back any program endorsed by
international organizations, including the International Monetary
Fund (IMF), the World Bank (WB) and the Asian Development Bank
(ADB) to help Indonesia recover from the currency turmoil.
IMF delegates and WB and ADB representatives are in Jakarta to
discuss a financial aid package for Indonesia. The IMF-led team
has not yet announced details of the aid package but analysts
speculate that the assistance would include standby loans worth
up to US$12 billion.
Sakakibara said the IMF-led mission would likely come up with
some kind of a package, which might include technical assistance
and "standby" financing facilities.
"The World Bank and the IMF have programs, such as structural
adjustment loans," he said of the possible assistance from the
two agencies.
Sakakibara, who also met members of the IMF-led team during
his Indonesian visit, said the financing facilities could be used
to restructure the Indonesian financial sector.
Speculative attacks, which also hit other Southeast Asian
currencies, have caused the rupiah to lose over 35 percent of its
value against the U.S. dollar since early July.
After a series of unsuccessful measures, the government
announced last week it would seek help from the IMF and other
international organizations to cope with the currency crisis.
The rupiah surged to 3,540/50 in the afternoon yesterday
after trading above 3,700 earlier in the day. Currency dealers
attributed the strengthening of the Indonesian currency to
Sakakibara's comments on his government's readiness to help
Indonesia.
Sakakibara said Indonesia had some structural issues that
needed to be addressed immediately.
"The IMF, ADB and the World Bank should address these issues
and come up with support to solve these structural problems
because we think if they were solved, we could see the conclusion
of the crisis," he said at a press conference held at Bank
Indonesia's office.
But Sakakibara declined to name the structural issues, saying
it was not in his capacity to disclose them.
Despite the structural problems, Indonesian economic
fundamentals remained sound, he said.
"After a lengthy discussion with the IMF, the World Bank and
ADB yesterday, we all shared the same view that the Indonesian
economy is not suffering from a financial crisis but a confidence
crisis," he said.
"It is the loss of confidence on the part of Indonesians that
has worsened the situation, not weak fundamentals," he said of
the reason behind the sharp fall in the rupiah.
To restore confidence, there must be structural reform,
especially in the financial sector, he said.
Sakakibara said the crisis, aside from being caused by the
contagion effects of currencies in the region, was also triggered
by the rupiah being overvalued, which needed correction.
The sharp depreciation of the rupiah against the dollar was
partly justified, he said, comparing the current situation to the
time when the Japanese yen was overvalued against the dollar.
In the last two years, the yen had depreciated by as much as
50 percent against the dollar to correct itself, he said.
Sakakibara said he believed that the currency had completed
its adjustment and would stabilize by next month.
He said Japan had also proposed to Indonesia to hold regular
bilateral meetings to discuss foreign exchange and financial
issues.
According to Sakakibara, outstanding Japanese loans to
Indonesia's private sector reached $22 billion by the end of last
year.
This was about half of Japanese loans to Thailand, he said,
adding that short-term loans made up about 60 percent of the
amount. (das)
JAKARTA (JP): Japan's Vice Finance Minister for International
Affairs Eisuke Sakakibara said here yesterday that the Japanese
government was ready to help Indonesia cope with its currency
crisis.
"The Japanese government stands solidly behind Indonesia...
and is ready to extend bilateral financial or technical
assistance to the country," Sakakibara said following a meeting
with Bank Indonesia Governor J. Soedradjad Djiwandono.
Sakakibara said Japan would back any program endorsed by
international organizations, including the International Monetary
Fund (IMF), the World Bank (WB) and the Asian Development Bank
(ADB) to help Indonesia recover from the currency turmoil.
IMF delegates and WB and ADB representatives are in Jakarta to
discuss a financial aid package for Indonesia. The IMF-led team
has not yet announced details of the aid package but analysts
speculate that the assistance would include standby loans worth
up to US$12 billion.
Sakakibara said the IMF-led mission would likely come up with
some kind of a package, which might include technical assistance
and "standby" financing facilities.
"The World Bank and the IMF have programs, such as structural
adjustment loans," he said of the possible assistance from the
two agencies.
Sakakibara, who also met members of the IMF-led team during
his Indonesian visit, said the financing facilities could be used
to restructure the Indonesian financial sector.
Speculative attacks, which also hit other Southeast Asian
currencies, have caused the rupiah to lose over 35 percent of its
value against the U.S. dollar since early July.
After a series of unsuccessful measures, the government
announced last week it would seek help from the IMF and other
international organizations to cope with the currency crisis.
The rupiah surged to 3,540/50 in the afternoon yesterday
after trading above 3,700 earlier in the day. Currency dealers
attributed the strengthening of the Indonesian currency to
Sakakibara's comments on his government's readiness to help
Indonesia.
Sakakibara said Indonesia had some structural issues that
needed to be addressed immediately.
"The IMF, ADB and the World Bank should address these issues
and come up with support to solve these structural problems
because we think if they were solved, we could see the conclusion
of the crisis," he said at a press conference held at Bank
Indonesia's office.
But Sakakibara declined to name the structural issues, saying
it was not in his capacity to disclose them.
Despite the structural problems, Indonesian economic
fundamentals remained sound, he said.
"After a lengthy discussion with the IMF, the World Bank and
ADB yesterday, we all shared the same view that the Indonesian
economy is not suffering from a financial crisis but a confidence
crisis," he said.
"It is the loss of confidence on the part of Indonesians that
has worsened the situation, not weak fundamentals," he said of
the reason behind the sharp fall in the rupiah.
To restore confidence, there must be structural reform,
especially in the financial sector, he said.
Sakakibara said the crisis, aside from being caused by the
contagion effects of currencies in the region, was also triggered
by the rupiah being overvalued, which needed correction.
The sharp depreciation of the rupiah against the dollar was
partly justified, he said, comparing the current situation to the
time when the Japanese yen was overvalued against the dollar.
In the last two years, the yen had depreciated by as much as
50 percent against the dollar to correct itself, he said.
Sakakibara said he believed that the currency had completed
its adjustment and would stabilize by next month.
He said Japan had also proposed to Indonesia to hold regular
bilateral meetings to discuss foreign exchange and financial
issues.
According to Sakakibara, outstanding Japanese loans to
Indonesia's private sector reached $22 billion by the end of last
year.
This was about half of Japanese loans to Thailand, he said,
adding that short-term loans made up about 60 percent of the
amount. (das)