Soeharto dismisses doubts over ability to pay debts

Soeharto dismisses doubts over ability to pay debts

JAKARTA (JP): President Soeharto yesterday dismissed doubts
about Indonesia's ability to repay its foreign debts, which are
now approaching US$100 billion.

The President said fears that the country would not be able to
settle its foreign debts were baseless, given the sound condition
of the country's economy.

"There is much concern about the foreign debt and about our
ability to repay the loans," he said in a briefing with 11
ministers, nine provincial governors, 16 regents and four
executives of non-government organizations.

Soeharto acknowledged that the government's loans, of about
$60 billion, combined with the $40 billion owed by private
companies, were the burden of the whole people.

"But the loans were not used for anything other than
supporting the development and accumulation of the country's
assets," he said.

Assets of state-owned companies, for example, had grown
significantly, he said, to Rp 358 trillion ($160 billion),
compared with about Rp 230 trillion in 1992, partly through the
use of foreign loans.

"If a part of the state's assets were sold, the government
would have more than enough funds to settle its foreign debt," he
said.

"But we don't want to adopt such a debt solution because most
of the debts are untied, carrying interest rates of only about
2.6 percent," he added.

Private

The President said that, similarly, the people should not
doubt the ability of the private sector to repay its debts
because, like state-owned firms, their assets were also much
larger than their financial burdens.

Economists have called on the government to closely control
the flow of offshore loans into the country and to prevent them
from exceeding the psychologically significant level of US$100
billion, which they claim could affect confidence in the
Indonesian economy.

According to Bank Indonesia, the government's outstanding
external debts reached about $64 billion as of last month. About
46.6 percent of the total debts are categorized as concessional
loans, carrying annual interest rates of less than three percent
per annum. Another 16.6 percent are semi-commercial loans and the
remaining 1.8 percent are commercial loans, carrying interest
rates of between six and seven percent per annum.

According to the central bank's records, the debt owed by the
private sector is about $30 billion.

The government last year divested part of its stocks in PT
Indosat, the state-owned international telecommunications company
-- now listed on New York and Jakarta stock exchanges -- to
prepay official loans carrying interest rates of above nine
percent.

PT Telekomunikasi Indonesia (Telkom), the state-owned domestic
telecommunications operator, is now preparing for a public
offering of its shares in New York, London and Jakarta for the
same purpose.

At yesterday's briefing the President ruled out the prepayment
of the concessional loans because, he said, such a loan solution
could harm the country's economy.

"It is useless to prepay all the soft loans," he said of the
untied loans, which not only carry low interest rates but also
have longer grace periods.

He acknowledged that the sharp appreciation of the yen had had
a negative impact on the concessional loans, some 40 percent of
which are denominated in the Japanese currency.

"We can solve the problems caused by the yen surge if we want.
We can settle all of them," he said.

In attendance at the briefing were Coordinating Minister for
People's Welfare Azwar Anas, State Minister of
Population/Chairman of the National Family Planning Board Haryono
Suyono, Minister of Cooperatives and Small Enterprises Subiakto
Tjakrawerdaya, Transmigration Minister Siswono Yudohusodo,
Minister of Women's Roles Mien Sugandhi, Minister of Trade Satrio
B. Joedono and Minister of Health Sujudi. (hen)