Weak rupiah hampers debt restructuring target: JITF

JAKARTA (JP): A weaker and volatile rupiah coupled with political instability have hampered debt restructuring negotiation of indebted companies under the Jakarta Initiative Task Force (JITF), an executive at the task force said on Monday.

JITF chairman Bacilius Ruru said unfavorable economic conditions as well as lingering political instability are obstructions to current and upcoming debt restructuring talks.

"The weaker rupiah, macroeconomics, and political instability should be considered when determining (JITF's) target," Ruru told reporters following the induction ceremony of the Jakarta Stock Exchange's new board of commissioners.

Ruru replaced Erry Riyana Hardjapamekas as the exchange's new chief commissioner.

However, Ruru stopped short of suggesting the government or the International Monetary Fund (IMF) lower JITF's next target.

"We just want them (the government and the IMF) to take into account the (above) factors," he said.

The government set up JITF in 1998 to help accelerate the debt restructuring process of the country's private sector.

The task force plays only a mediating role between debtors and creditors. Nonetheless, it's debt restructuring target is part of reform target contained in the Letter of Intent (LoI) signed with the International Monetary Fund (IMF).

Indonesia must meet the LoI target in order to receive the IMF's three-year economic bail out program worth US$5 billion.

Ruru further warned that because of the weaker rupiah, some companies, whose debts have already been restructured, might ask to renegotiate their debt restructuring deals.

"Considering the current rupiah rates, it (renegotiation) is quite possible," he said.

"But so far we haven't received any appeals from restructured companies asking for new mediation," Ruru added.

The preferred rupiah rate, he said, should be at least equal to that used under the state budget, which the government plans to revise to 9,600 from 7,800 against the greenback.

In the past few months, however, the rupiah has been trading at above 10,000 to the dollar on continued political bickering that gave rise to speculative rupiah trading.

Another problem in JITF's debt restructuring program, he continued, was that more companies with smaller debts sought the task force's mediation.

He said the number of companies with over $100 million in debts has declined, with the average debt per company now ranging between $100 million and $50 million.

"Note that the number of man-hours we must invest to restructure debts worth $1 billion and those worth $50 million is the same," he explained.

Even if JITF were to be given the same target as last year, its task will be more time consuming, according to Ruru.

"I'm not saying it (debt restructuring) has become more difficult, but that this should be considered when determining (JITF's) next target," he added.

He said he hoped to bring up this issue when meeting the government and the IMF to discuss JITF's new target.

JITF's target in the last LoI was set at $12 billion, which the task force should have completed by April this year.

Commenting on JITF's last target, Ruru said the task force managed to mediate debt restructuring deals worth $11.8 billion, just slightly below its target.

"I think under present conditions the figure ($11.8 billion) could be seen as some achievement," he said.

He said JITF had reported its result to the IMF but had received no feedback.

"Neither can I say they've (IMF) accepted the figure, nor that they don't have any complaints," he said. (bkm)