Plan to use budget for recapitalization called 'unfair'<\/p>\n
JAKARTA (JP): The government's plan to use a large part of the
\n2000 state budget to finance bank recapitalization costs is
\nunfair, according to analysts.<\/p>\n
Analyst Didik J. Rachbini said on Friday that the bank
\nrecapitalization costs, approximately 50 percent of the total tax
\nreceipts, would certainly impose a heavy burden on the people.<\/p>\n
\"Would it be fair if most of the tax revenues were used to
\nfinance bank recapitalization?\" Didik, a senior analyst at the
\nInstitute for Development of Economics and Finance (Indef), asked
\na press briefing.<\/p>\n
The government has earmarked Rp 42 trillion (US$5.7 billion)
\nof state revenues for interest payments on bonds issued to
\nrecapitalize the country's ailing banks. The amount is almost one
\nthird of the total state revenues or about 50 percent of the
\nprojected tax receipts.<\/p>\n
Didik said the bank recapitalization costs would be born
\nmostly by taxpayers as the tax revenues were expected to come
\nlargely from income tax payments.<\/p>\n
In the Jan-Dec budget, the government expects to raise tax
\nrevenue by 38.7 percent, or Rp 27.3 trillion, to Rp 91 trillion
\nfrom the same nine-month period in the current 1999\/2000 fiscal
\nstate budget ending in March.<\/p>\n
The next budget will last only nine months as the government
\nwill align its fiscal year with the calender year beginning Jan.
\n2001.<\/p>\n
\"Spending one third of the state revenues on bank
\nrecapitalization is too much,\" Didik said.<\/p>\n
According to him, the government should narrow bank
\nrecapitalization costs to the asset values for the ailing banks
\nthat the government has targeted to sell.<\/p>\n
The Indonesian Banking Restructuring Agency (IBRA) controls
\nsome Rp 600 trillion in bank assets, of which it intends to sell
\nRp 16.2 trillion according to the draft state budget, dropping Rp
\n0.8 trillion from the present fiscal year target.<\/p>\n
Didik said it would be difficult for the government to
\nrecapitalize all the banks and suggested that only selected banks
\nshould receive government funds.<\/p>\n
Didik also suggested that the government consider lowering the
\npresent Capital Adequacy Ratio (CAR) from four percent in order
\nto reduce recapitalization costs.<\/p>\n
\"A lower CAR would allow banks to channel loans so that we can
\npress down the recapitalization costs,\" Didik said, adding that
\nthis move would require careful calculation.<\/p>\n
Many banks are restrained from extending loans to keep their
\nCAR at the minimum level. Raising loans will mean a lower CAR
\nlevel, as a result many banks put their idle funds on Bank
\nIndonesia's promissory notes which offer interest rates lower
\nthan the rate charged by banks to their depositors.<\/p>\n
Analyst Arif Arryman from Econit said that in pushing bank
\nrecapitalization, IBRA's target of Rp 16.2 trillion in sold bank
\nassets was too small compared to the value of assets it
\ncontrolled.<\/p>\n
Banks, he said, should speed up the process of recovering non-
\nperforming loans, as the slow recovery of these loans forces the
\ngovernment to issue obligations that ultimately burden tax
\npayers.<\/p>\n
He also said that the proposed state budget failed to give a
\nclear accounting of the sale of the government bonds which were
\nissued to recapitalize the ailing banks.<\/p>\n
\"If the government doesn't trade its bonds in the stock
\nmarket, the recapitalization program will remain a burden to the
\nstate budget,\" Arif told the briefing. (03)<\/p>",
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