Agus Martowardojo Urges Companies to Step Up Prudence - Indonesia Finance Minister Agus Martowardojo on Wednesday urged private companies to be more prudent about debt denominated in foreign currencies as global uncertainties have increased the risk of a reversal of sentiment over the rupiah and other emerging market assets.
The rupiah's appreciation--it has gained around 5% against the U.S. dollar so far this year--and low interest rates in developed nations have encouraged local companies to issue bonds or take out bank loans denominated in foreign currencies.
But Martowardojo said the companies should bear in mind the experiences of the Asian crisis in 1997/1998. One of the reasons for rupiah appreciation “is capital inflows, which can immediately change. Prudence needs to be maintained in managing foreign currency debts, (companies) need to be cautious when tapping cheap foreign loans, especially if the firms don't have foreign currency revenues,“ he said.
“At the moment we're still doing moral suasion and discussing with Bank Indonesia and Bapepam,“ the nation's capital market regulator, the steps that can be taken, he said.
The rupiah's appreciation--it has gained around 5% against the U.S. dollar so far this year--and low interest rates in developed nations have encouraged local companies to issue bonds or take out bank loans denominated in foreign currencies.
But Martowardojo said the companies should bear in mind the experiences of the Asian crisis in 1997/1998. One of the reasons for rupiah appreciation “is capital inflows, which can immediately change. Prudence needs to be maintained in managing foreign currency debts, (companies) need to be cautious when tapping cheap foreign loans, especially if the firms don't have foreign currency revenues,“ he said.
“At the moment we're still doing moral suasion and discussing with Bank Indonesia and Bapepam,“ the nation's capital market regulator, the steps that can be taken, he said.
Source: english.kompas.com
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