Indonesia seeks crisis loans

Indonesia seeks crisis loans


Building homes: A labourer carries steel bars at a construction site for a new apartment building in Jakarta on Nov 24. Picture: Reuters
JAKARTA/CANBERRA

Thursday, November 27, 2008

INDONESIA has approached Australia, Japan, the World Bank and other official creditors to line up credit to help cover a projected US$4.4 billion budget deficit next year, a finance ministry official said yesterday.

Indonesian policymakers are worried they may face problems raising funds amid market turmoil sparked by fears it could become the next casualty of a worldwide flight from risky assets. The rupiah currency has fallen almost 25 per cent this year.

Rahmat Waluyanto, the Indonesian finance ministry's treasury director general, said the Asian Development Bank had indicated it would make US$1 billion available, but the terms of other loans were still being discussed.

"This is actually a precautionary measure in case there is trouble in the financial markets which disturbs our bond issues," he told Reuters by telephone, adding that loans would be agreed on a basis whereby they would only be released if there was a trigger.

"Basically they all support us, but as for the numbers, how much they will be, what the terms and conditions are, we have not agreed on those yet," he added.

Australian Treasurer Wayne Swan confirmed Indonesia had approached Australia for a loan, which newspapers reported amounted to about US$2 billion.

Indonesia previously sought help from Australia during the 1997/1998 Asian financial crisis, with Canberra lending US$1 billion for structural reform in a government-to-government arrangement.

"It is the case that the Indonesians have approached a number of international organisations, including the World Bank, and also have approached the Australian government for some assistance at a time which is very testing," Swan told Parliament in Canberra.

An Indonesian team, including a senior adviser to Finance Minister Sri Mulyani Indrawati, met Australian Treasury officials on Monday to discuss the terms of a loan, an Indonesian source told Reuters earlier.

Indonesia has forecast its budget deficit will be around 52.7 trillion rupiah (US$4.37 billion) next year.

But financial turmoil is making it hard for emerging economies to secure loans or sell bonds as international investors shy away from markets perceived as high risk.

There has been market talk that Indonesia was considering assessing the IMF's special Short-term Lending Facility, to boost its foreign exchange reserves.Reuters