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)