Yen depreciation helps reduce RI foreign debt

JAKARTA (JP): Minister of Finance Mar'ie Muhammad said Indonesia's offshore debts would continue to decrease along with the steady depreciation of the Japanese yen against the U.S. dollar.

Mar'ie said at a hearing of the House Budgetary Commission yesterday that depreciation of 1 yen against the U.S. greenback would reduce Indonesia's foreign debt by US$33 million.

"Thus, if the depreciation is 3 yen, our debts would fall by some $100 million because our debt amortization and interest payments are denominated in American dollars," Mar'ie said.

He said earlier the government's foreign debt had dropped from $59.59 billion at the end of 1995 to $54.6 billion last November, or about 50 percent of the country's total foreign debt of some $110 billion.

The fall in government debt resulted from the early repayment of high-interest loans and a sharp depreciation of the yen against the dollar.

The dollar was worth about 100 yen in December 1995 after dipping to its lowest level, about 80 yen, several months earlier. The dollar continued to recover and rallied to 113.50 yen last November and 123.70 yesterday.

The country's yen-denominated offshore debt, which accounted for about 40 percent of its total foreign debt, fell to $22.4 billion last September from $24.03 billion in December 1995.

Mar'ie said the government's debt servicing -- amortization and interest payments -- would total $7.6 billion for the next fiscal year, starting in April.

"However, if the yen continues to depreciate against the dollar, our debt servicing could be lower because every depreciation of 1 yen would save us $33 million," Mar'ie said.

He said the government had planned to pay out $2,445.5 million in debt amortization and interest payments during the first three months of this year. Of this total, $724 million would be in yen.

The minister said the government would continue to depreciate the rupiah against the U.S. dollar. "However, it is difficult to say now how much the depreciation would be during the next fiscal year.

"However, it is important for us to maintain a realistic exchange rate for the rupiah, meaning that the rupiah is not over or undervalued," he said.

Bad loans

Meanwhile, Bambang Subianto, director general of financial institutions at the finance ministry, reported that bad loans at the country's commercial banks totaled Rp 10.4 trillion ($4.34 billion) at the end of November.

The bad loans accounted for 3.26 percent of total credits extended by all commercial banks, down from 3.4 percent in August.

The seven state banks accounted for the largest portion of the total bad loans with Rp 7.07 trillion, or 2.21 percent of the total outstanding bank credits, down slightly from 2.33 percent last August.

The seven state banks are Bank Negara Indonesia 1946 (BNI), Bank Pembangunan Indonesia (Bapindo), Bank Bumi Daya, Bank Rakyat Indonesia, Bank Dagang Negara, Bank Ekspor Impor Indonesia and Bank Tabungan Negara.

Indonesia has 232 private commercial banks, including provincial development banks.

Bambang said problem loans at all commercial banks increased to Rp 9.3 trillion in November from Rp 9.09 trillion in August, while their doubtful loans dropped slightly to Rp 12.1 trillion from Rp 12.26 trillion.

Thus, a total of Rp 31.8 trillion, almost 10 percent of the total loans extended by all commercial banks, fell under the category of problem, doubtful and bad.

Banks have been encouraged to write off their swelling bad credits. However, they must provide 100 percent reserves for bad loans, 50 percent for doubtful loans and 10 percent for problem loans.

Bambang also reported that his office had licensed 239 pension funds established by companies for their employees. The 239 pension funds managed a total of Rp 20 trillion as of the end of last year, of which they invested Rp 14 trillion in various instruments.

He added that his office had also licensed 21 pension funds managed by financial institutions, either banks or insurance firms. The 21 funds managed a total fund of Rp 187 billion as of the end of last year, of which they invested Rp 183 billion in various financial instruments. (rid)