Government told to take corrective action over BI problems<\/p>\n
JAKARTA (JP): The International Monetary Fund has told
\nIndonesia to take corrective action to deal with problems at Bank
\nIndonesia which were highlighted in a damning audit by the
\nSupreme Audit Agency (BPK).<\/p>\n
IMF Indonesia representative John Dodsworth said on Monday the
\nfund agreed with the government's proposal to recapitalize the
\ncentral bank should the audit agency's clarification audit on
\nBI's assets prove a negative equity.<\/p>\n
\"I think the corrective actions will include some
\nrecapitalization of Bank Indonesia, and the exact amount,
\nhowever, needs further review.\"<\/p>\n
He noted that the recapitalization of the central bank would
\nbe financed by government bonds.<\/p>\n
\"Clearly, we want Bank Indonesia to be a solvent central bank
\nwith full credibility in the market.\"<\/p>\n
Dodsworth said IMF experts would arrive in Indonesia this week
\nto outline the corrective measures together with government
\nofficials and representatives of BPK and Bank Indonesia.<\/p>\n
The corrective measures would be included in the next letter
\nof intent to be signed by the government and the IMF in the
\nmiddle of this month, he said.<\/p>\n
\"By mid January, when we are ready to sign the letter of
\nintent, we have to have a scheme for the corrective actions to
\ntake place,\" he said.<\/p>\n
The IMF is the lead arranger of a multibillion dollar
\ninternational bailout package for Indonesia. Signing the letter
\nof intent is a prerequisite for the release of loans from the
\nfund.<\/p>\n
Bank Indonesia administrators were taken aback by the
\nannouncement of BPK's audit.<\/p>\n
Bank Indonesia's board of governors have repeatedly contended
\nthat the damaging \"no opinion\" conclusion by BPK on BI's balance
\nsheet per May 17 -- the date it legally becomes independent of
\nthe government -- would not have happened if it was given a
\nchance to discuss the matter with the auditors.<\/p>\n
They argued that differences between the government and the
\ncentral bank on the status of Rp 51.7 trillion of emergency
\nliquidity credits should have been settled first before BPK drew
\nany conclusion or announced the result. The credits were extended
\nby the central bank to commercial banks since late 1997 under the
\ngovernment's blanket guarantee program.<\/p>\n
The government and BPK went ahead with announcing the results
\nof the audit. They demanded the central bank take drastic
\ncorrective measures regarding its personnel, organization,
\ninternal supervision systems and the supervision of banks.<\/p>\n
The government asked the House of Representatives to assign
\nBPK the task of conducting an investigative audit, especially on
\nthe disbursement of emergency liquidity loans to commercial
\nbanks.<\/p>\n
Former finance minister Fuad Bawazier supported the
\ngovernment's move and said he conducted a preliminary audit of
\nBI's emergency credits and found some irregularities when he was
\nbriefly finance minister in early 1998.<\/p>\n
BI deputy governor Miranda S. Goeltom said on Monday BI had no
\nobjection to BPK or the government's Development Finance
\nComptroller (BPKP) auditing the disbursement of such emergency
\nloans. However, she believed the audit should also cover the
\nrecipient banks.<\/p>\n
However, she was displeased with the forced announcement of
\nBPK's audit report on BI, arguing that it would have a damaging
\nimpact on BI's yankee bonds, BI's credibility to guarantee
\nletters of credits and the central bank's capability to absorb
\nthe government bonds to recapitalize commercial banks.<\/p>\n
Dodsworth disagreed with predictions of the audit's impact. \"I
\ndon't think that we're going to see very much market disruption
\nas a result of the disclosure of the audit. I don't see in this
\naudit anything that would suggest that Bank Indonesia is not
\ngoing to meet its obligation.<\/p>\n
\"On these grounds, we see a lot of advantages from
\ntransparency. Bank Indonesia will come out stronger as a result.\"<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/government-told-to-take-corrective-action-over-bi-problems-1447893297",
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