Weakening yen helps reduce Indonesia's debts

Weakening yen helps reduce Indonesia's debts

JAKARTA (JP): The appreciation of the U.S. dollar against the
yen has helped reduce Indonesia's foreign debts in dollar terms
but threatens the competitiveness of the country's exports,
especially to Japan, Finance Minister Mar'ie Muhammad said
yesterday.

After meeting President Soeharto yesterday Mar'ie said the
strengthening dollar had caused the rupiah to continue
depreciating against the greenback but rise against the yen.

"It is true the weakening yen has made our debts to Japan
smaller because the debts are stated in U.S. dollars. However, it
is not true that our economy is improving because of it," Mar'ie
said.

Bank Indonesia Governor J. Soedradjad Djiwandono said last
month Indonesia's foreign debt was about US$110 billion. Fifty
percent of this was government debt.

Indonesia's yen-denominated foreign debts, which accounted for
about 40 percent of its foreign debt, fell to US$22.4 billion as
of last September from $24.03 billion in December 1995.

The dollar was worth about 100 yen in December 1995 after
dipping to its lowest level, about 80 yen, in April, 1995. The
dollar has continued to recover and was worth 124.20 yen
yesterday.

Mar'ie said the dollar's appreciation against the yen should
warn Indonesian exporters, especially those exporting to Japan,
to strengthen their competitiveness.

"What's more important for us is that we maintain our
competitiveness because 90 percent of our international trade is
denominated in U.S. dollars," Mar'ie said.

In the meeting with the President Mar'ie reported on
Indonesia's preparation for next month's meeting of ASEAN finance
ministers in Phuket, Thailand.

The meeting is expected to discuss liberalizing the region's
finance sectors under the ASEAN Framework Agreement on Services.

Mar'ie declined to comment on Indonesia's position on the
possible liberalization.

Mar'ie said earlier the reduction in government foreign debt
was because of the early repayment of high-interest debts and the
depreciation of the yen against the U.S. dollar.

The government has repaid $2.6 billion of foreign debt ahead
of schedule since the 1994/1995 fiscal year, saving the
government US$1.45 billion in interest.

Budget surpluses and proceeds from the sale of state
enterprises funded the early repayments, he said.

In the 1994/1995 fiscal year the government paid debts with
interest rates of 11 percent or more with proceeds from selling
shares in international telecommunications firm PT Indosat.

In 1995/1996, the government repaid debts with interest of 10
percent or more with proceeds from the privatization of domestic
telecommunications firm PT Telkom and tin mining company PT
Tambang Timah.

Last October, the government repaid debts with interest of 9
percent or more with budget surplus money.

Last December, the government proposed to settle its debts
with interest of 8 percent or more to the World Bank and Asian
Development Bank, using proceeds from selling more Telkom shares
overseas. (rid)