RI commits to servicing foreign debt

JAKARTA (JP): Minister of Finance Mar'ie Muhammad reaffirmed yesterday the government's strong commitment to meeting all its foreign debt obligations on schedule despite the rupiah's sharp depreciation.

"We even intend to continue amortizing the high interest- portion of our debts ahead of their maturity dates as we have done in previous fiscal years," Mar'ie told the House of Representatives.

He told the House Budgetary Commission the government would do its best to prevent its short-term debts from default.

He acknowledged that Indonesia's foreign debts were increasing in rupiah terms and foreign debt servicing would be larger than that stated in the current budget.

Latest official estimates put the government's foreign debts outstanding as of March at US$53.3 billion.

In the 1997/1998 fiscal year, the government budgeted Rp 19.57 trillion (US$6.7 billion) in amortization and interest payments for its foreign debts.

In the past, the government's annual debt servicing stood at $8 billion.

Indonesia's debt servicing has been decreasing in dollar terms as the government repaid some of its high-interest debts ahead of schedule.

In the 1994/1995 to 1996/1997 fiscal years, the government repaid $2.6 billion in long-term, fixed high-interest foreign debts ahead of schedule, saving the government $1.45 billion in interest payments.

Such early repayments of debts were funded by budget surpluses and proceeds from the initial public offerings by state enterprises.

Mar'ie said the early repayment of high-interest debts would improve creditors' confidence in the country and reduce the government's debt servicing burden.

Despite the increasing foreign debt servicing in rupiah terms, Mar'ie said the government would do its best to avoid deficit financing by adjusting its spending to the expected decline in tax receipts.

"Therefore, there will be some changes (in the current budget)," Mar'ie said without elaborating.

Many have forecasted that the domestic revenue from taxes will decline as corporate profits are projected to drop due to the weakening of the rupiah and the credit crunch imposed to cope with the currency turmoil.

"For that reason, we have been pursuing and economizing (in our spending) to save our budget," Mar'ie said.

He said what Indonesia was experiencing now was not an economic crisis but a currency crisis, which also befell other regional currencies.

"Therefore, the government needs to address it as quickly as possible so that it doesn't drag on and have more devastating impacts on the economy," Mar'ie said.

In a bid to boost confidence in the rupiah, the government moved last week to revise its budget, liberalize foreign purchases of shares, strengthen the banking industry and raise the luxury sales tax on several goods.

A special ministerial team is reviewing development projects, particularly those with high import content, for rescheduling or postponement.

State Minister of Research and Technology B.J. Habibie said at a separate House hearing that the government would not reschedule strategic industry projects.

He contended that projects like aircraft development by state- owned PT IPTN in Bandung would continue as they were long-term projects which, if postponed, would undermine their viability.

"There is no ground at all to stop or postpone projects which were planned 20 years ago just because of monetary volatility," Habibie said.

He said IPTN's latest commuter turboprop N-250 had drawn a lot of interest from potential buyers.

"If orders for N-250 continue to flow in, IPTN will one day be able to produce one aircraft per day," he said.

"If we stop the project in this situation, wouldn't it become superfluous? That's what we should be aware of," Habibie said.

He said projects which had just started could be postponed but should not be canceled if they would benefit the country's economy in the long run. (amd/rid)