Jakarta borrowing $5.9b to cover budget deficit

JAKARTA • Indonesia will borrow US$4.2 billion (S$5.9 billion) in multilateral loans from the World Bank and Asian Development Bank to cover a widening budget deficit, a finance ministry official said yesterday.

"We're choosing foreign sources because the market is still volatile and Indonesian growth is slowing," Mr Scenaider Siahaan, an official with the finance ministry's debt management office, told reporters.

He said the loans would strengthen forex reserves, which the central bank said fell to US$103 billion this week from US$105.35 billion at the end of last month.

The central bank often uses its forex reserves to help defend the weakening rupiah, which dropped to a 17-year low of 14,500 against the US dollar yesterday and is the worst-performing currency in the region this year after Malaysia's ringgit.

However, the nation's top economic policymakers said they were not worried about the country's falling reserves as long as they could cover at least six months' worth of imports.

Bank Indonesia governor Agus Martowardojo told reporters yesterday he was not worried about the possibility of reserves falling below US$100 billion, a thres-hold last crossed in December 2013.

Finance Minister Bambang Brodjonegoro said forex reserves were adequate "as long as they covered six to seven months of imports".

Based on that, the authorities would not be concerned about the level of forex reserves until they dropped below US$89 billion, according to Reuters' calculations.

The US$4.2 billion loan would come from the World Bank, Asian Development Bank, France's Agence Francaise de Developpement and Germany's KfW Development Bank.

Mr Siahaan said that the government would not issue new local currency bonds this year despite the widening budget deficit, which is expected at 2.23 per cent of gross domestic product this year.

The finance ministry would issue around 500 trillion rupiah (S$48.5 billion) worth of bonds next year, pending parliamentary approval, he said.

REUTERS

A version of this article appeared in the print edition of The Straits Times on September 23, 2015, with the headline 'Jakarta borrowing $5.9b to cover budget deficit'. Print Edition | Subscribe