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)