Foreign Creditors Confirm Loan Deals

The Jakarta Globe, Muhamad Al Azhari & Sally Piri, February 2, 2009

Finance Minister Sri Mulyani Indrawati said on Monday that the government had received confirmations of support from overseas lenders for $5.5 billion in standby loans to help plug the 2009 national budget deficit. 

Hoping to spur the economy, the government has raised its 2009 budget deficit target from Rp 51.3 trillion ($4.41 billion), or 1.5 percent of this year’s projected gross domestic product, to Rp 132 trillion, or 2.5 percent of GDP. 

To help finance deficits, the government has in the past relied on selling debt paper in the financial markets. But with debt markets souring amid the global credit crunch, the government is considering using standby loans from multilateral agencies and donor countries instead. 

“The government has taken measures to secure financing and is announcing [Monday] that we have bilateral and multilateral support that could reach $5 billion or even $6 billion,” Sri Mulyani told reporters after a cabinet meeting. 

Anggito Abimanyu, head of fiscal policy at the Ministry of Finance said that Indonesia had requested loans from creditor countries like Japan, Australia, Britain and France, and from multilateral development agencies like the World Bank and the Asian Development Bank. 

Now that commitments of support from lenders have been secured, the government can decide whether to accept the loans. 

The government is likely to opt to take the loans if turmoil in the financial markets further increases the cost of borrowing. 

The government had aimed to raise Rp 99.7 trillion in gross bond issuance this year, but that number may shrink to Rp 54 trillion, after deducting bonds maturing this year and possible buybacks. 

Also on Monday, Bank Indonesia Governor Boediono said that Indonesia is in negotiations with Japan to secure a debt swap agreement that would allow Indonesia to borrow yen using rupiah-denominated collateral. 

He declined to say how much money the agreement might raise but expected to reach a deal by the end of February.

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