Singapore's $5 billion loan to be at 'commercial' rate
Singapore's $5 billion loan to be at 'commercial' rate
SINGAPORE (Reuters): Singapore pledged yesterday to help
support Indonesia through its financial troubles but said its
promised loan of up to US$5 billion would be offered at
commercial rates of interest.
Finance Minister Richard Hu told parliament the previously
announced loan was a back-up facility to support the Indonesian
economy and would only be drawn down if other loans from various
international financial institutions had been exhausted.
He said the loan would be offered for up to five years in
tranches of US$1 billion each to be drawn at the request of the
Indonesian government. It would be offered at the Singapore Bank
Offered Rate (SIBOR) for six months plus a premium.
He declined to say what that premium would be.
"It is a commitment. It is not giving. It is not a gift. This
is a commercial loan attracting commercial interest rates," Hu
said. He said if the facility was drawn down, it would have to be
repaid after five years or earlier.
He stressed the loan would not be used unless what he called
Indonesia's "frontline defense" financial assistance of US$23
billion from the International Monetary Fund, World Bank and
Asian Development Bank had already been used up.
"If it is drawn down it is to be used as if it were part of
the Indonesian government's reserves," he said.
He said there was little risk of the money being lost and
stressed any loans would remain part of Singapore's foreign
assets.
"There is every likelihood that there may be no need to draw
on this supplementary line of defense," Hu said.
He said Singapore was also collaborating with the Indonesian
government to intervene in currency markets to support the
Indonesian currency, the rupiah.
"The fall in the value of the rupiah has been excessive and
could jeopardize the successful implementation of (Indonesia's)
economic reform program," he said.
"Therefore (Singapore and Japan) have agreed to collaborate
with the Bank of Indonesia through joint intervention in foreign
exchange markets to promote the strengthening of the rupiah to
levels consistent with Indonesia's economic fundamentals.
"The amount of our intervention is not predetermined and will
depend on developments in the foreign exchange markets," the
minister said.
Answering questions in parliament on why Singapore, a tiny
island state of only three million people, had made such a large
financial commitment to Indonesia, Hu said Singapore was affected
by the well-being of its neighbors.
"It is in our interest to do what we can to maintain the
economic and financial stability of the region," he said. "The
recent currency turmoil has revealed the close interdependence of
the economies of this region."
"The health of the Indonesian economy is critical not only to
Singapore but also to the overall prosperity of the region. The
restoration of investor confidence in Indonesia will help
stabilize regional financial markets. Singapore will benefit when
Indonesia's economy recovers and resumes strong growth."