Govt repays bonds in cash<\/p>\n
Dadan Wijaksana, The Jakarta Post, Jakarta<\/p>\n
The government said it had repaid in cash some Rp 3.9 trillion
\n(US$431 million) worth of bank recapitalization bonds maturing on
\nThursday by using part of proceeds from the sale of assets under
\nthe Indonesian Bank Restructuring Agency (IBRA).<\/p>\n
\"Yes, we made the payment in cash for the bonds just in time,\"
\nAnggito Abimanyu, a senior official at the Ministry of Finance,
\ntold The Jakarta Post.<\/p>\n
Anggito's statement was confirmed by an official at Bank
\nIndonesia, saying the central bank had received official
\nnotification from the ministry to use the funds from a
\ngovernment's account at the central bank.<\/p>\n
The government issued around Rp 430 trillion-worth of bonds in
\nthe late 1990s to finance the recapitalization of several ailing
\nbanks. The first tranche of bonds to mature is worth Rp 3.9
\ntrillion.<\/p>\n
Reports said that most of these bonds were held by Bank
\nCentral Asia (BCA).<\/p>\n
The government has previously said it would later issue bonds
\nworth Rp 3.9 trillion to replace the proceeds taken from IBRA.
\nThe House of Representatives has given its approval on the bond
\nissuance plan.<\/p>\n
There had been concerns expressed earlier that the cash-
\nstrapped government might be unable to repay the maturing bonds.<\/p>\n
The government had initially planned to issue treasury bills
\n(T-bills), a special type of bond with a maturity period of 6
\nmonths to 12 months, to refinance the maturing bonds.<\/p>\n
This could not be done as the House has yet to pass the bill
\non sovereign debt securities into law, which would provide a
\nlegal basis for the T-bills.<\/p>\n
After that, lawmakers also blocked the government's plans to
\nuse funds designed for an emergency.<\/p>\n
Although the payout on the bonds to mature first has now been
\nmade, it is highly unlikely that the government will simply relax
\nand sit back, as analysts have warned of a possible financial
\ndisaster if the government fails to take measures to overcome its
\nhuge domestic debt problem.<\/p>\n
Next year, the financial commitment on maturing bonds will
\nincrease to around Rp 13.5 trillion. Starting in 2004, a large
\nproportion of the bank recap bonds will start maturing, even more
\nthan hitherto.<\/p>\n
This will peak in 2009, when the government has to cover the
\nredemption of more than Rp 80 trillion-worth of bonds.<\/p>\n
Managing and restructuring this huge public debt has been one
\nof the most difficult problems faced by the government.<\/p>\n
This debt payment has certainly limited state spending on the
\ndevelopment program. This year alone, some Rp 59 trillion has
\nbeen allocated to cover the interest on recap bonds, which
\naccounts for 70 percent of this year's debt repayments.<\/p>\n
IBRA has been targeted to rake in Rp 42.8 trillion in cash and
\nbonds this year from the sale of its assets.<\/p>\n
The cash is supposed to finance the state budget deficit,
\nestimated to be around Rp 42 trillion.<\/p>",
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"sponsor": "Okusi Associates",
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