Private sector owes $29b by April 1999

Private sector owes $29b by April 1999

JAKARTA (JP): Indonesia's private sector foreign debt due this
fiscal year, including that owed by commercial banks, totals
US$29.2 billion, Coordinating Minister for Economy, Finance and
Industry Ginandjar Kartasasmita said yesterday.

Speaking to journalists after meeting President B.J. Habibie,
Ginandjar said external corporate debt stood at US$20 billion and
the non-trade liabilities of commercial banks at $9.2 billion.

"Hence, last week's agreement to reschedule the foreign debts
for up to eight years, including three years of grace period,
would be quite a relief.

"If we (our companies) have to repay entirely these $30
billion debts, it would be quite a pressure on our balance of
payments because that amount is more than twice as large as our
foreign exchange reserves", Ginandjar added.

Ginandjar, along with Director General of Financial
Institutions Glenn Yusuf, Bank Indonesia Director Dono Iskandar
and Indonesian debt settlement team chairman Radius Prawiro, met
with Habibie to report about an agreement with creditors to
restructure the country's mounting private foreign debt.

Indonesia and its creditor banks agreed in Frankfurt last week
on a program relating to private corporate debt, external credits
to the Indonesian banking system and trade finance.

The corporate debt arrangements envisaged the creation of the
Indonesian Debt Restructuring Agency (INDRA), fully backed by the
Indonesian government and administered by the central bank, Bank
Indonesia.

INDRA will provide exchange-rate risk protection and
assurances as to the availability of foreign exchange to private
debtors that agree with their creditors to restructure their
external debt for a period of eight years, with three years of
grace during which no principle will be payable.

"The immediate benefit from the debt rescheduling agreement is
that our balance of payments, which has been under severe
pressure so far, will be given a chance to breathe," Ginandjar
said.

However, he could not predict how many debtors and creditors
would join the INDRA program as participation in INDRA was
voluntary and would require the consent of both debtors and
creditors.

Debtors and creditors could still negotiate to find the best
solutions for them. But if they could not reach an agreement,
they could join INDRA. The creditors could also demand the
debtors be liquidated.

"So, if they can get a better deal, please go ahead. They
could work it out outside INDRA. But if not, they should join
INDRA arrangement," Ginandjar said.

Radius explained that participants in INDRA will be entitled
to purchase U.S. dollars at the best real 20-day average market
exchange rate from August 1 until June 30, 1999.

The debtors would be able to repay their debt in rupiah to
INDRA at a set interest rate for eight years and Indra would
repay the debt to the lenders.

Dono predicted that the rupiah would start to strengthen when
the program becomes operational on August 1 as demand for dollars
should drop.

"The current (dollar-rupiah) exchange rate is still too high
because demand for dollars and other foreign exchange are still
increasing due to our huge debts.

"But when debtors and creditors agree to restructure their
debts, according to the INDRA scheme, the demand for dollars will
drop, and the rupiah should strengthen," Dono added. (prb/rid)