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)