Govt, BI end dispute on BLBI loans<\/p>\n
Dadan Wijaksana, The Jakarta Post, Jakarta<\/p>\n
The House of Representatives is likely to approve a new deal
\nbetween the government and Bank Indonesia on a mechanism to
\nresolve a two-year dispute over how to share the burden of
\nmisused emergency loans (BLBI) given to ailing banks in the late
\n1990s.<\/p>\n
Under the agreement, the government will issue special bonds
\ncalled perpetual promissory notes (PPN) to the central bank to
\ncover the loans. This will not create too much of a burden on
\nthe cash-strapped government because it does not have to pay
\ninterest, but only to the limit where Bank Indonesia's capital
\ncondition is not jeopardized. The PPN also do not have maturity
\nprofiles.<\/p>\n
Government and Bank Indonesia officials declined to provide
\ndetails of the agreement, saying that it had not yet been
\napproved by the House and that the two still had to finalize the
\ndetails.<\/p>\n
But senior legislator Paskah Suzetta of the House of
\nRepresentatives Commission IX on financial affairs hailed the
\nplan as the best solution to end the long-standing dispute which
\nhad created uncertainty at the central bank.<\/p>\n
\"I think, this scheme is the most feasible way to resolve the
\ndispute, and it would also ease the burden on the state budget as
\nwell,\" Paskah told reporters on Wednesday.<\/p>\n
The government, via the central bank, issued some Rp 144.5
\ntrillion in emergency loans to ailing banks between 1998 and
\n1999.<\/p>\n
The government was supposed to cover the loans by issuing
\nbonds to Bank Indonesia, but it declined to do so after an audit
\nby the Supreme Audit Agency (BPK) revealed that some Rp 134.5
\ntrillion had been misused by recipient banks. The government
\nthen demanded the central bank to take responsibility for the
\nmismanagement, and asked it to also share the losses.<\/p>\n
But forcing Bank Indonesia to cover the huge losses would send
\nthe central bank into bankruptcy.<\/p>\n
Late in 2000, the government and Bank Indonesia agreed on a
\nburden sharing mechanism, under which the central bank would
\ncover some Rp 24.5 trillion of the abused loans. But the deal
\nlacked support from legislators.<\/p>\n
Then the IMF proposed an independent team of experts to seek a
\nsolution to the problem. The team then recommended the issuance
\nof the PPN.<\/p>\n
It is not yet clear when the House would give its formal
\napproval on the new mechanism.<\/p>\n
The new deal should help ease the burden of the state budget
\nin covering the interest rate of huge government bonds issued in
\nthe late 1990s to bailout ailing banks.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/govt-bi-end-dispute-on-blbi-loans-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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