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Agency: Bad Indonesia Loans To Rise

May 27, 1998

SINGAPORE (AP) _ The Standard & Poor’s rating agency said today that it expects the number of bad loans in Indonesia to surpass earlier forecasts because of recent turmoil in the country.

Ken McLay, director of financial institution rating services, said the agency’s original 55 percent forecast likely would be ``on the low side,″ according to Dow Jones Newswires.

Speaking at a seminar in Singapore, McLay said it was too early to tell exactly how far above that figure the bad loans would rise.

As the country emerges from the unrest of the past few weeks, including the resignation of President Suharto, the cost of looting, rioting, capital flight and general business disruption have compounded the effects of decades of inefficient crony capitalism.

An International Monetary Fund team returned Tuesday to the capital, Jakarta, after the situation in the country stabilized and new President B.J. Habibie promised reforms.

IMF director for Asia and Pacific Affairs Hubert Neiss was scheduled to meet with Habibie over the next few days, while the president struggles to rebuild a shattered economy, including a banking sector in shambles.

On Tuesday in Jakarta, worried customers continued a run on Indonesia’s largest private bank, forcing the central bank to provide it with extra cash. Confidence is at an all-time low among foreign investors and many Indonesians.

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