Japanese bank proposes debt-servicing fund
Japanese bank proposes debt-servicing fund
TOKYO (Agencies): Bank of Tokyo-Mitsubishi Ltd (BTM) said yesterday it was proposing to the Japanese and Indonesian governments that they set up a fund to allow Indonesian firms to exchange the rupiah for the U.S. dollar at a much stronger rate than the current level.
BTM is one of Japan's largest creditors to Indonesia.
A senior bank official told Reuters that if corporations in Indonesia are able to exchange the rupiah at around 5,000 to the dollar, most of them would stay in business.
He said that the fund would enable corporations to sell the rupiah for the dollar at around 5,000 in order to service their dollar-denominated debt and to buy the Indonesian currency back from the fund at the same exchange rate one year later.
A fund worth $10 billion to $15 billion might be needed to allow Indonesian corporations to hedge their dollar-based debt, the senior BTM official said.
"Stabilizing the currency rate will be the first priority for the crisis-hit nation," he said.
Meanwhile a Japanese daily said in Tokyo that the Group of Seven (G-7) major economies will discuss Tokyo-Mitsubishi Bank proposal to set up a $10-15 billion foreign exchange stabilization fund for Indonesia at its meeting in London on Feb. 21.
The Nihon Keizai Shimbun said the step will help alleviate the foreign debts of Indonesian companies, which are denominated mostly in dollars, the leading economic daily said.
Japan's Ministry of Finance, Foreign Ministry and Ministry of International Trade and Industry will send a delegation to Indonesia and Singapore on Wednesday for discussions on the economic situation in Indonesia.
The delegation is intended to gather information to help Tokyo decide what assistance Japan can extend to Indonesia ahead the G- 7 meeting later this month, where the Asian financial crisis is expected to be discussed.
Japan is Indonesia's largest creditor, with Japanese banks accounting for 39 percent, or $23 billion, of Indonesia's $58.7 billion in foreign bank debt at the end of June 1997, figures released by the Bank for International Settlements (BIS) show.
In late January, Jakarta proposed a temporary freeze on corporate debt service payments and declared it would adopt new servicing measures and would reform its banking sector.
A voluntary framework for restructuring Indonesia's foreign private debt has been worked out between Indonesian borrowers and their creditors. BTM is a member of the lenders' steering committee.
On Monday, President Soeharto said the government would soon announce new steps on the exchange rate to keep prices of priority imports under control and to provide a certain calculation base for exports.
In a related development, Malaysian Deputy Prime Minister Anwar Ibrahim said in Tokyo yesterday that Japan is discussing additional steps to help Indonesia cope with its debt problems and that he hopes Japan will expand its assistance to Indonesia.
Asked if he was referring to an idea for the governments of Japan and Indonesia to set up a rupiah stabilization fund, Anwar told Reuters that the issue was touched on in talks he has held during a two-day visit to Tokyo.