Managing foreign loans

Managing foreign loans

In the last three years the government appears to have been
serious in its efforts to confront the problem of foreign loans.
This is apparent from the way it has sped up the repayment of
loans acquired from the Asian Development Bank (ADB) to the
amount of US$625 million.

There has only been three instances of prepayments of foreign
loans to date. The first, amounting to US$782.9 million, was made
during the 1994/1995 fiscal year on loans extended by the World
Bank and the ADB. The following year a similar step was made when
the government paid the two international financial institutions
US$760,670.

According to the explanation given in an address by Minister
of Finance Mar'ie Muhammad at ADB's 29th annual meeting in Manila
recently, all this is part of the government's prudent borrowing
and foreign loan management policies and is at the same time
meant to enhance Indonesia's international credibility.

The explanation given by the finance minister is quite correct
considering the fact that foreign loans are among the biggest
strains on the Indonesian economy. Care must be taken, since our
foreign debts -- both the government's and that of private
business -- have reached huge proportions, nearing in fact the
US$100 billion mark.

Actually, the problem is not so much in the sum total of debts
incurred as in our ability to utilize and repay them. This is the
reason the government should strive for better management of our
foreign loans, first by ensuring that they are utilized more
efficiently and effectively on the basis of a distinct list of
priorities.

Aside from that, it is time that we restructure our foreign
loans so that we are not overly dependent on currency which may
be prone to fluctuations, such as the yen, while most of our
export earnings are in American dollars.

-- Bisnis Indonesia, Jakarta