Rupiah rebounds as Indonesia formalises debt moratorium
Wednesday 28 January 1998
"What we have in mind is a temporary pause, so that we have time to reach an agreement between lenders and borrowers," said Radius Prawiro, a former cabinet minister appointed by President Suharto to help resolve the debt crisis. But he insisted Indonesia had no intention of seeking a national private debt moratorium.
Analysts said the announcement was vague, and made no mention of reform for Indonesia's unenforcable bankruptcy laws. A steering committee will be set up, including representatives of creditor banks, but there was no official word of how long the repayment freeze would remain in place.
But the uncertainty fostered by the moratorium was offset by the banking reforms, which will open Indonesian banks to foreign ownership and create a new body, the Indonesian Bank Restructuring Agency (IBRA), to take over and recover crippled banks.
Mari'e Muhammad, the finance minister, also announced government guarantees for depositors and creditors of commercial banks. Asia's markets are winding down for a long weekend due to the Chinese New Year and the Muslim holiday Eid al-Fitr, and the impact of the reforms on the markets will not be clear until next week.
The rupiah's plunge to a fifth of its value six months ago has made it impossibly expensive for companies to pay back dollar-denominated loans from foreign banks. Conservative estimates of private sector debt put it at $66bn (pounds 40bn), rendering most Indonesian companies technically insolvent.
Meanwhile Fitch IBCA, the credit rating agency, said Japanese banks faced "significant" risks as a result of the Asian crisis which, added to their other problems, could lead to downward rating adjustments.
Fitch IBCA estimated the extent of world-wide bank exposure to the south-east Asian region at more than $600bn.
- 3 The enemy within: People who hear voices in their heads are being encouraged to talk back
- 4 British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
French court convicts three over homophobic tweets, in case hailed as a 'significant victory' by LGBT rights campaigners
Greece elections: Syriza and EU on collision course after election win for left-wing party
British Muslim school children suffering a backlash of abuse following Paris attacks
Islamic history is full of free thinkers - but recent attempts to suppress critical thought are verging on the absurd
30,000 reasons why the rhetoric on immigrants claiming benefits can stop now
iJobs Money & Business
£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...
£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...
£25 - 28k + Bonus: Guru Careers: An In-house / Internal Recruiter is needed to...
Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...