RI's foreign debt tops $117 billion

JAKARTA (JP): Minister of Finance Mar'ie Muhammad revealed yesterday that the country's foreign debt stood at US$117 billion as of September, a 7.3 percent increase from $109.3 billion recorded in March.

Mar'ie said in a written reply to questions by the House of Representatives Commission VIII for state budget and finance that the government's debt decreased to $52.3 billion from $53.3 billion.

But private sector debt rose to $65 billion due to an increase in investment activities.

"At the end of the current 1997/1998 fiscal year (in March), our total debt-to-service ratio (the ratio of foreign debt to export revenue) is expected to stand at 34.5 percent," Mar'ie said.

Initially, the government predicted the country's debt-to- service ratio would be 31.2 percent by the end of the fiscal year, with government debt accounting for 11.8 percent, private sector 17.8 percent and state firms 1.6 percent.

To reduce the debt-to-service ratio, Mar'ie said the government would impose stricter requirements on the private sector's foreign loans and would step up efforts to increase exports.

"To reduce the burden on our balance of payments, we need to curb private-sector borrowing," Mar'ie said.

Meanwhile, the government would continue to adhere to prudent debt management by repaying foreign loans that carried high interest rates ahead of schedule.

Mar'ie said most of the government's offshore loans were provided under either bilateral or multilateral arrangements, which had long-term maturity and carried low interest rates.

Of the government's outstanding debt, $20.63 billion was made under bilateral arrangements, carrying an average interest rate of 2.6 percent.

The other $16.01 billion was borrowed though multilateral deals, carrying an average interest rate of 7 percent annually.

Another $14.5 billion in external loans was provided in the form of credit exports, $9.96 million in commercial loans, $1.1 billion in lease deals and the remaining $54,000 in bonds.

Mar'ie said the sharp depreciation of the rupiah against the U.S. dollar would increase the burden on the current state budget.

He said every drop of Rp 100 against the dollar would increase the government's foreign debt servicing burden by Rp 500 billion ($145 million).

"Therefore, if the depreciation continues until the end of the current 1997/1998 fiscal year, it will add to the burden of our foreign debt servicing," Mar'ie said.

The Indonesian rupiah has depreciated by about 35 percent against the U.S. dollar since early July, from about 2,450 to 3,450 yesterday.

He said that as of last June, 43.3 percent of Indonesia's offshore loans were denominated in U.S. dollars, 39.5 percent in Japanese yen and the remaining 17.2 percent in other currencies.

"The government will continue to pursue prudent foreign debt management so that foreign debt servicing will not adversely affect our routine budget," Mar'ie said.

He said the government had spent Rp 9.56 trillion in the first half of this year to service its foreign debt.

For the second half of the fiscal year, the government will have to earmark $4.7 billion to pay the principal and interest of its external loans.

During the second half, Mar'ie said, the government would receive some $3.4 billion in new loans within the framework of the Consultative Group on Indonesia. This does not include $6 billion to be withdrawn from multilateral institutions under the International Monetary Fund (IMF) bailout package.

But funds from the IMF would mainly be used to support Indonesia's real estate sector reform program and macroeconomic adjustment.

In addition to the IMF-led loan commitments, Mar'ie said, the government still maintained standby loans from several commercial banks totaling $2.04 billion to safeguard Indonesia's balance of payments.

Such standby loans were deemed necessary, considering capital inflow was expected to drop significantly. (rid)