New restructuring plans won't ease debt: Experts<\/p>\n
Dadan Wijaksana, The Jakarta Post, Jakarta<\/p>\n
Plans to restructure the maturity profile of the government's
\nbank recapitalization (recap) bonds will not be of much help in
\nresolving the huge domestic debt problem as the move will only
\nallow the government to extend the maturity period without
\nactually reducing the value of the bonds, analysts have said.<\/p>\n
\"This would only delay the maturity period, as the actual
\nvalue (of the bonds) would remain unchanged,\" banking analyst
\nRyan Kiryanto told The Jakarta Post on Monday.<\/p>\n
Dradjat Wibowo also agreed by saying that the scheme was just
\nanother form of financial engineering.<\/p>\n
\"All these approaches only extend the maturity period of those
\nbonds, but will not solve the real problems,\" he said on the
\nsidelines of a seminar here.<\/p>\n
The government plans to introduce a scheme that will allow it
\nto exchange bonds maturing between 2004 and 2009 with ones that
\nhave a longer maturity profile but carry a higher interest rate.<\/p>\n
Fuad Rachmany, head of the state bond management center at the
\nMinistry of Finance, was reported by media as saying that the
\nmaturity profile of those bonds would be shifted to 2020, as part
\nof efforts to ease the burden on the government.<\/p>\n
The recap bonds, issued during the late 1990s crisis to bail
\nout the faltering banking sector, have the potential to become a
\nfiscal disaster -- especially starting in 2004 when a large chunk
\nof them begins to mature.<\/p>\n
The recap bonds, totaling some Rp 430 trillion (around US$48
\nbillion), make up the lion's share of the government's domestic
\ndebts amounting to around Rp 660 trillion.<\/p>\n
Fuad said that the government was making final preparations,
\nwith the official announcement of the new plan expected to made
\nlater this year.<\/p>\n
So far, however, it remains unclear as to how much value of
\nthe bonds could be replaced by this new scheme, as it has to be
\ndiscussed with banks holding the recap bonds.<\/p>\n
As the move would increase the banks' risks of losses from
\npotential revenues, the scheme would provide several incentives
\nto them -- including a higher interest rate.<\/p>\n
This would create more of a burden for the state budget,
\nalready constrained by its domestic debt servicing requirement.<\/p>\n
As a comparison, the state budget has to allocate this year
\nalmost Rp 60 trillion for repaying interest on the recap bonds.<\/p>\n
Nevertheless, Ryan generally welcomed the idea, saying this
\nwould at least give the cash-strapped government a breathing
\nspace.<\/p>\n
\"But in the meantime, the government needs to make the best of
\nthis, which is to collect enough ammunition to redeem all those
\nrecap bonds,\" Ryan said.<\/p>",
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