Soaring yen may force govt review of project funding
Soaring yen may force govt review of project funding
JAKARTA (JP): Senior officials said yesterday that the government is likely to review the financing of its projects, including those of the strategic industries, due to increasing pressure in honoring its foreign debt caused by the rising yen.
"Yes, we might have to review the financing of most of the government's projects because the yen's appreciation (against the U.S. dollar) has increased our debt burden," Soekarno Wirokartono, Deputy Chairman for Fiscal and Monetary Affairs of the National Development Planning Board (Bappenas), said yesterday in his reply to reporters' questions on the impact of the rising yen.
Soekarno was accompanied by several top Bappenas officials, including Deputy Chairman for Economic Affairs Muslimin Nasution, Deputy Chairman for Infrastructure Rustam Didong and secretary to the Bappenas Chairman, Mustafa Dijaya.
The dollar slipped again yesterday on the Tokyo foreign exchange market to 88.46 yen from 89.73 yen on Tuesday.
Although Indonesia has never rescheduled its debts, some analysts have expressed concern over the rising Japanese currency because, according to them, every time the yen goes up by one percent against the dollar, it adds $300 million or more to Indonesia's debts.
The Japanese government, the biggest provider of Indonesian loans, stated two weeks ago that it had no remedy for the growing debt burden inflicted by the yen's sharp rise upon the recipients of its loans.
Official figures cite that Indonesia's foreign debt, most of which is long-term government loans, totals approximately US$88 billion. About 40 percent of those loans are denominated in yen.
About 15 percent of the country's 1995-1996 State Budget is financed by foreign development loans.
Indonesia's legislators have stated that the rising Japanese currency might force the government to spend less on development projects, so that it could concentrate its resources on dealing with the rising debt burdens.
Legislators from the Indonesian Democratic Party (PDI) and the United Development Party (PPP) told Minister of Finance Mar'ie Muhammad during a budgetary hearing early this week that the government "should postpone its less important projects."
IPTN
Soekarno confirmed reporters questions yesterday that Bappenas will also review the financing of Indonesia's ambitious projects, such as aircraft manufacturing, to be carried out by PT Industri Pesawat Terbang Nusantara (IPTN).
"Yes, IPTN's projects will also be reviewed. However, I'm sure that all of the ministers will have self-restraint," he said.
State Minister for Research and Technology B.J. Habibie, IPTN's president, conceded recently that the company's heavily subsidized project is not efficiently run.
Habibie, who also chairs the Agency for the Management of Strategic Industries (BPIS), recently requested export credit facilities for the sale of BPIS's products.
Minister Mar'ie, who initially rejected the request, has said that he will "consider" Habibie's idea "as long as it does not burden the country's fiscal and monetary management."
Mar'ie said last week that the government planned to increase the portion of yen in Indonesia's foreign exchange reserves (totaling around $13 billion) from the present level of 35 percent.
Only two years ago, the yen comprised 27 percent of the government's total foreign exchange reserves.
Mar'ie also said last week that the government will also "try to lobby" multilateral agencies, which in the past extended their credits partly in yen, to denominate all their loans in the U.S. dollar. (hdj)