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Pertamina, others will struggle to cut foreign debts: Minister
State-Owned Enterprises Minister Dahlan Iskan has acknowledged that it would be difficult to comply with a Bank Indonesia (BI) request to reduce the foreign debts of state-owned companies, especially oil and gas giant Pertamina and electric company PLN
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tate-Owned Enterprises Minister Dahlan Iskan has acknowledged that it would be difficult to comply with a Bank Indonesia (BI) request to reduce the foreign debts of state-owned companies, especially oil and gas giant Pertamina and electric company PLN.
Speaking following a meeting of executives of state-owned firms at Pertamina's headquarters in Jakarta on Thursday, Dahlan said the central bank's governor Agus Martowardojo's appeal to the ministry to rein in foreign borrowing would be difficult to meet, especially for Pertamina with its large US dollar needs to finance fuel imports.
'The BI governor has pushed the ministry to reduce the amount of external debt, but Pertamina's case is an exceptional one,' Dahlan said.
The minister added that the amount of external debt owed by Pertamina and PT PLN amounted to only 7 percent of total private sector debt.
'If anything, there should be a regulation on the private sector's debt, because their figures are much larger,' he was quoted as saying by kompas.com.
Agus affirmed on Thursday that BI would continue monitoring external debt figures and appeal to domestic lenders, state-owned companies and private companies to cut their foreign debt levels.
BI announced recently that Indonesia's foreign debt had reached US$276.5 billion as of March 2014, an increase by $4.15 billion from $272.35 billion in the previous month.
Most of the debt stemmed from the private sector with US$145.98 billion, while the rest came the central bank with $130.5 billion and the government. According to BI data through March 2014, the nation's long-term debts, with a tenor of more than a year, were $229.26 billion, while the rest were classified as short-term debts with a tenor of less than a year.
In the first quarter of 2014, the debt-to-GDP ratio stood at 32.35 percent, up from the previous quarter's 30.37 percent. The debt ratio is also higher than a year ago when it was 28.79 percent.
Commenting on the gradual increase of debt, BI senior deputy governor Mirza Adityaswara urged the private sector to watch its foreign spending so as to uphold economic growth.
Indonesia's debt-service ratio increased to 42.73 percent in 2013, which was 21 percent higher than the figure in 2009. The debt-service ratio compares principal and interest payments on external debt to a country's total export figures.
The government aims to reduce Indonesia's external debt in order to discourage overseas dependency and reduce currency risks.
Debt Management Office director general Robert Pakpahan said recently that the government aimed to gradually reduce its total foreign debt to 40 percent of gross domestic product (GDP) in 2014 from 43 percent in 2013 and to 37.3 percent by 2016.
According to the Organization for Economic Cooperation and Development (OECD), a country's
international finances are healthier if its debt-service ratio is low, as it is an indicator of a country's debt burden. (dyl)
