RI's memorandum of economic and financial policies<\/p>\n
The following is the text of Indonesia's Second Memorandum of
\nEconomic and Financial Policies attached to the letter of intent
\nsigned by Coordinating Minister for Economy, Finance and Industry
\nGinandjar Kartasasmita Thursday in Jakarta.<\/p>\n
1. The revised economic program set out in the Memorandum of
\nEconomic and Financial Policies signed on April 10, despite a
\npromising start, has been driven well off track by the social
\ndisturbances and political change that occurred in May. While the
\nnew government is strongly committed to rapid stabilization of
\nthe economy and the far-reaching structural reform described in
\nthe MEPP, significant changes to the macroeconomic framework and
\nto monetary and fiscal policy -- including to allow for a
\nstrengthened social safety net to cushion the escalating effects
\nof the crisis on the poor -- are now needed. The most urgent
\npriority is to repair the distribution system and ensure adequate
\nsupplies of food and other necessities to all parts of the
\ncountry. Also, moving quickly to restructure comprehensively the
\nbanking system is of the highest priority. Achieving these
\nobjectives will, until the economy recovers, require considerable
\nadditional financial support from the international community.
\nThis Supplementary Memorandum describes the changes to our
\neconomic program, with the modifications to the social safety net
\nand banking restructuring highlighted in the attached appendices.
\nA revised listing of all policy commitments under the program is
\nshown in the attached matrix.<\/p>\n
2. As a result of the social and political upheavals in May, the
\neconomic situation and outlook have worsened considerably, and
\nthe economy faces a very serious crisis. The distribution network
\nhas been badly damaged, economic activity, including exports,
\ngenerally disrupted, and business confidence severely shaken. As
\na result, the exchange rate has substantially weakened, rather
\nthan appreciating as envisaged in the April program, and
\ninflation is running higher than projected. Because of shortfalls
\nin budgetary resources, expenditures have had to be compressed to
\nunsustainable levels, with adverse consequences for social
\nservices and economic activity. In addition, large-scale
\nliquidity support has had to be provided to meet runs on a major
\nprivate bank, which has since been placed under the control of
\nthe bank restructuring agency (IBRA)<\/p>\n
3. Despite those unfavorable developments, Bank Indonesia has
\nmaintained firm control over monetary policy, effectively
\nreabsorbing most of the liquidity provided to meet the bank run.
\nAlthough base money is somewhat above the indicative target in
\nthe program, this mostly represents an increase in currency
\ndemand following the bank run; net domestic assets (NDA) remain
\nwithin the April program target. Also, by avoiding intervention
\nin the foreign exchange market, net international reserves are
\nstill above the target established in the April program. Another
\nimportant positive development is that agreement was reached with
\nthe Steering Committee of creditor banks in Frankfurt in early
\nJune on the restructuring of interbank debt, on maintaining trade
\ncredit, and on a scheme for restructuring corporate debt. These
\nagreements are a crucial element of our overall economic
\nstrategy, and should provide some immediate relief to the foreign
\nexchange market, and facilitate the revival of trade and economic
\nactivity.<\/p>\n
Macro Framework<\/p>\n
4. With the disruptions to economic activity and damage to
\nbusiness confidence in recent weeks, it is now expected that real
\nGDP will decline by more than 10 percent in 1998. However, we
\nbelieve that the decline in activity should bottom out as the
\nprogram takes hold and confidence is restored. The exchange rate,
\nwhich in a thin market has been very volatile and dominated by
\nsudden shifts in market confidence is particularly difficult to
\nforecast. The revised program is based on the conservative
\nassumption that the exchange rate will stabilize by the last
\nquarter of 1998 at around Rp 10,000 per dollar, but we expect a
\ngreater strengthening of the exchange rate. Reflecting high
\ninflation in the first quarter, inflation is likely to amount to
\nabout 80 percent during calendar 1998, but should slow rapidly
\nduring coming months. This revised macroeconomic framework is
\nsubject to unusually large uncertainty, and will be kept under
\nreview.<\/p>\n
Fiscal Policy<\/p>\n
5. A central feature of the program continues to be the
\nlimitation of the budget deficit to a level that can be offset by
\nadditional foreign financing. The pressures on the budget,
\nhowever, have intensified with the deepening of the crisis. The
\ndepreciation of the exchange rate, through its impact on the cost
\nof subsidies and debt service, the further decline in oil prices
\nand weakening of output all add substantially to the deficit. In
\naddition, given the severity of the crisis and its
\ndisproportionate impact on the poor, there is an urgent need to
\nstrengthen the social safety net to alleviate the impact of
\nhigher unemployment and underemployment and the greater incidence
\nof poverty.<\/p>\n
6. The overall budgetary cost of social safety net program is
\nnow estimated at about 7 1\/2 percent of GDP. Food, fuel,
\nelectricity, medicine, and other subsidies are estimated, with
\npresent prices, to amount to about 6 percent of GDP in 1998\/99,
\nabout 4 percentage points higher than envisaged in April. In
\naddition, the government is expanding employment generating
\nprograms, targeted to poor and vulnerable regions and households,
\nsupported by the World Bank, the Asian Development Bank, and
\nbilateral donors. The UN World Food Program is establishing food-
\nfor-work programs, concentrated in drought-affected areas.
\nBudgetary allocations for health are being increased with
\nemphasis on spending directed to the vulnerable groups, including
\nvillage health centers and immunization programs. To minimize the
\ndecline in school enrollment, the government is expanding the
\nblock grant program, strengthening the school lunch program and
\ninstituting a scholarship program for poor students. Further
\ndetails of social safety net programs are shown in Annex I.<\/p>\n
7. Without offsetting measures, the budget deficit could
\nincrease to an unmanageable level in 1998\/99. the viable options
\nfor reducing the deficit are few, given the weakness of the
\neconomy. Significant revenue measures are not feasible in short
\nterm, although over the medium term we intend to overhaul the
\nrevenue system, and we intend to request IMF technical assistance
\nto this end. Further increases in the administered prices of
\nstaple foods and fuels would exacerbate the impact of the crisis
\non the poor, and will have to be delayed until the economy has
\nbegun to improve. It remains our objective, however, to phase out
\nsubsidies as output and household incomes recover, and a system
\nfor adjusting administered prices on a regular basis will be
\ndeveloped by the end of this fiscal year. So the savings are
\nenvisaged from improvements in efficiency in the management of
\nstate-run operations, including through the renegotiation of
\nexisting contracts, and from resources previously utilized
\noutside the budget. Most of the needed savings, however, will
\nhave to come from cuts in infrastructure projects. We have
\nreviewed investment spending in the budget carefully, and in
\nclose collaboration with the Asian Development Bank and World
\nBank have cut or delayed projects amounting to about 2.5
\npercentage points of GDP.<\/p>\n
8. These cuts reduce the protected budget deficit to 8.5 percent
\nof GDP in 1998\/99, a level that we believe can be offset by
\nadditional foreign financing. A deficit of this magnitude, while
\njustified by the severity of the present crisis, is not
\nsustainable. We envisage that the overall deficit in the
\n1999\/2000 budget will be substantially smaller in relation to
\nGDP, partly as a result of measures to raise revenue and reduce
\nsubsidies.<\/p>\n
Monetary Policy and Banking System<\/p>\n
9. Tight monetary policy continues to be essential if the
\nexchange rate is to stabilize and inflation decline. Given the
\nrecent weakness of the rupiah and the danger of an inflationary
\nspiral, we intend to hold base money and NDA broadly constant
\nduring the third quarter. As in the April program, allowance has
\nbeen made in the monetary program for the repayment of arrears on
\ninterbank debt and trade credit under the agreement with foreign
\nbanks, which will imply a fall in net international reserves
\n(NIR) of about $1 billion and a corresponding increase in NDA in
\nlate June. Once the economy has stabilized, some modest increase
\nin NDA and base money will probably be needed to accommodate a
\nrecovery in economic activity. Because of the considerable
\nuncertainty about the demand for rupiah, however monetary policy
\nwill be kept under continuous review, and adjusted as necessary,
\nincluding in light of developments in the exchange rate and
\ninflation.<\/p>\n
10. To strengthen monetary management, BI intends to switch from
\nthe current system in which interest rates on central bank paper
\n(SBIs) are set administratively to an auction system for these
\ninstruments. This changeover will begin with auctions of one
\nmonth paper in July, and later expand to a full range of
\nmaturities. It is expected that auctions of SBIs will have become
\nthe primary means for conducting open market operations by end-
\nSeptember. In addition to strengthening monetary control, this
\nwill enable a fully market-determined term structure of interest
\nrates to emerge. Given the need to hold NDA and base money
\nconstant, interest rates are likely to remain high in the pear
\nterms, but should decline as markets stabilize. In order to
\nprovide BI with the autonomy for conducting monetary policy, the
\npreparation of legislation on central bank independence is being
\naccelerated and will be submitted to parliament by end September.<\/p>\n
11. The condition of banks has deteriorated further in recent
\nmonths, and implementing a comprehensive solution for the banking
\nsystem is being given the highest priority. This is an essential
\nprecondition for the recovery of the corporate sector. The
\nobjective is to resolve the financial difficulties of the weak
\nbanks and establish a sound functioning banking system quickly. A
\nkey element of the revised strategy involves measures to
\nstrengthen relatively sound banks partly through the infusion of
\nnew capital. The approach to the weak banks will involve moving
\nswiftly to recapitalize, merge or effectively close them, while
\nmaintaining the commitment to guarantee all depositors and
\ncreditors. Decisions regarding individual banks will be based on
\nuniform and transparent criteria, drawing as appropriate from the
\nresults of portfolio reviews by international accounting firms. A
\npresidential decree will be issued providing appropriate legal
\npowers to IBRA, including its Asset Management Unit by mid July
\n1998. Also, a high level Financial Sector Advisory Committee is
\nbeing established to advise on the coordination of all the
\naccessory actions for bank restructuring. the strategy for the
\nbanking system is described in more detail in Annex II.<\/p>\n
Corporate debt and bankruptcy legislation<\/p>\n
12. The financial restructuring of the corporate sector is
\ncrucial for economic recovery, and an essential counterpart to
\nbanking system restructuring -- a sound corporate sector is
\nnecessary for a sound banking sector. The scheme agreed in
\nFrankfurt provides a framework through the Indonesia Debt
\nRestructuring Agency (INDRA) for the voluntary restructuring of
\nthe debt of corporations to foreign banks on terms that are
\nconsistent with Indonesia's overall external payments capacity,
\nand that would give cash flow relief to domestic corporations. It
\nis envisaged that domestic as well as foreign creditors will
\nparticipate in debt workouts for individual companies, with all
\ncreditors sharing in the burden of providing the necessary
\nrelief. In some cases debt writedowns will be needed. IBRA,
\nespecially its asset management unit, will be the major
\nparticipant in many workouts.<\/p>\n
13. An effective bankruptcy system is an essential part of the
\ncorporate debt restructuring strategy, without which debtors may
\nbe reluctant to negotiate with their creditors. A government
\nregulation in lieu of law was issued in April 1998 to modernize
\nthe bankruptcy system and provide for the fair and expeditious
\nresolution of commercial disputes. It will take effect on August
\n20, 120 days after the date of enactment of the regulation. The
\nnew system will enable receivers and administrators to be drawn
\nfrom qualified professionals in the private sector. A commercial
\ncourt will be established (within the domain of the District
\nCourt) to handle matters under the bankruptcy regulation.
\nProcedural rules are designed to ensure certainty and
\ntransparency in the proceedings, especially to prevent
\nunjustifiable delays in the adjudication of bankruptcy.
\nSubstantive rules are being introduced to provide better
\nprotection to the assets of the estate. A committee was set up in
\nJune to oversee the selection of judges from the District Court
\nand the Supreme Court for the bankruptcy jurisdiction, the
\nprovision of a separate organizational structure for the
\nCommercial Court, including its own personnel, facilities and
\nequipment; the establishment of a training program in bankruptcy
\nand related issues for the judges that will be selected for the
\nCommercial Court, and the establishment of a system for the
\nselection, training and licensing of suitably qualified receivers
\nand administrators. The government has submitted the bankruptcy
\nregulation to Parliament for ratification.<\/p>\n
Food security<\/p>\n
14. The government is placing considerable emphasis on ensuring
\nthat there are adequate supplies of essential commodities,
\nespecially rice, and that these are available easily through the
\ndistribution system at affordable prices. Toward this end, BULOG
\nhas increased its import target for rice in 1998\/99 from 2.85
\nmillion tons to 3.1 million tons. Special measures are being
\nintroduced to ensure that domestic markets have adequate supplies
\nof cooking oil at reasonable prices. As noted earlier, food
\nsubsidies have been increased substantially this year, as part of
\na broader effort to ensure food security for the poor. To improve
\npurchasing power in rural and urban areas, the government plans
\nto set up public works projects throughout the country to boost
\nincomes of the poor, the unemployed and the underemployed. To
\nsupplement these efforts, food-for work programs are being
\nimplemented in drought-stricken areas of the country.<\/p>\n
15. A critical aspect of the government's efforts to improve food
\nsecurity is to rehabilitate and strengthen the distribution
\nsystem following the disruptions and damage cause by the recent
\nsocial disturbances. While private trading appears to be
\nreturning to normal in many parts of the country, the government
\nfeels that additional temporary measures are required to further
\nimprove the distribution system. The Ministry of Industry and
\nTrade has established a special monitoring unit to identify
\npotential shortages of foodstuffs or distribution bottlenecks so
\nthat the government can take early corrective action. In key
\nparts of the country, the government has been extending special
\nsecurity arrangements for the transport of essential commodities.
\nWhere retailing has been disrupted severely, the government is
\ntrying to reactivate the retail network through the
\nrehabilitation and construction of traditional markets. In some
\nespecially poor and remote regions of the country, where
\ntransport costs have risen sharply due to a shortage of spare
\nparts, the government is considering providing facilities for the
\ndirect distribution of food by government agencies. The Ministry
\nof Home Affairs has instructed regional government and local
\nauthorities to mobilize support for the private retail and
\nwholesale sector, including streamlining licensing procedures to
\nfacilitate interprovincial trade.<\/p>\n
Structure Policies<\/p>\n
16. The government remains committed to implementing all of the
\nstructural reforms agreed earlier, in collaboration with the
\nWorld Bank. The resource rent tax on logs and sawn timber has
\nbeen introduced and procedures are being established for regular
\nof the rate to reflect changes in world prices. The ban on palm
\noil exports has been effectively lifted. Environmental guidelines
\nhave been issued to clarify the procedures for foreign and
\ndomestic investment in palm oil plantations. The clove marketing
\nboard has been dissolved and cigarette manufacturers are now free
\nto purchase supplies from any source. Efforts are continuing to
\ncreate means by which private sector enterprises can compete
\neffectively with BULOG in the importation and marketing of wheat,
\nsoybean and sugar, although it is proving more difficult to
\ncomplete arrangements that had been expected. Finally
\ninternational standard audits will be undertaken of the financial
\naccounts of Pertamina (the state petroleum corporation), PLN (the
\nstate electrical corporation), BULOG, and the Reforestation Fund.<\/p>\n
17. The privatization program is proceeding on schedule. Despite
\nthe depressed state of the economy, taking into account the
\ninterest that has been expressed by foreign investors, we are
\nconfident that the projected receipts from privatization of $1.5
\nbillion for the 1998\/99 budget can be realized. The planned sales
\nof shares in the domestic and international telecommunication
\ncorporations will provide substantial part of this total. The
\nMinister of State Enterprises has issued a statement confirming
\nthat sales of shares in all enterprises would be conducted
\nthrough transparent competitive processes consistent with
\ninternational best practices. International investment bankers
\nhave been selected to advise on the sale of each of the twelve
\nenterprises that were identifies for privatization in April. In
\nparallel, international experts are being engaged to advise on
\nsector structure and regulatory oversight enterprises. This
\napproach will ensure a high quality technical foundation for
\nreforming state enterprises. The World Bank and the Asian
\nDevelopment Bank will finance these technical assistance services
\nin key policy and strategic areas. This will include the
\npreparation of a master plan on the reform of state enterprises,
\ncompromising programs of corporate restructuring and
\nprivatization for individual companies by September 30, 1998.<\/p>\n
Monitoring<\/p>\n
18. High priority is being given to effective monitoring of
\nthe economic program. The Monetary Monitoring Committee--
\ncompromising representatives of Bank Indonesia, the IMF, the U.S.
\nTreasury, and the Bundesbank-- has been meeting frequently since
\nApril. External debt monitoring is being undertaken on a daily
\nbasis by Bank Indonesia, with IMF assistance. A committee to
\nmonitor structural reforms has been established under the
\nchairmanship of the Ministers of Planning with representatives
\nfrom other government agencies, the World bank, the Asian
\nDevelopment Bank, and the IMF. Additionally we intend to ask the
\nIMF to provide a high- level expert to the Minister of Finance to
\nestablish budgetary monitoring mechanism including to ensure
\nexpenditure releases are consistent with agreed priorities.<\/p>\n
External Issues<\/p>\n
19. The large decline in trade credit in recent months is a major
\nconcern, particularly as it jeopardizes exports. Part of the
\nproblem has been the unwillingness of foreign banks to confirm a
\nletter of credit, but this is being addressed through the
\nassistance recently provided by JEXIM expert cover from a number
\nof credit agencies. and the Frankfurt trade facility agreement
\nwith foreign banks. A major remaining problem is the reluctance
\nof domestic banks to open letters of credit except on a cash
\nbasis, or to provide pre-shipment credit because of the weak
\nstate of the corporate sector. As a temporary solution, Bank
\nIndonesia will establish during July a pre- shipment export
\nguarantee program to facilitate import and pre-shipment export
\nfinancing for exporters holding export letters of credit. The
\nguarantee will be provided for a fee on a loan by loan basis and
\nwill be partial, so that risk is shared with the domestic bank.
\nThe program would be temporary and initially be limited to about
\n0.5 billion, the risk associated with the guarantee would be
\nborne by the government rather than Bank Indonesia. We believe
\nthis approach is warranted by the severity of the current crisis.<\/p>\n
20. The external financing needs of our economic program are
\nlarge. Despite the recent weakening in the exchange rate, the
\nexternal current account surplus is likely to be significantly
\nsmaller this year than envisaged earlier, as export markets have
\nbeen lost as a result of concerns on the part of foreign buyers
\nabout disruptions to supplies. In addition, recent political
\ndisturbances have caused further capital outflows, and weakened
\nthe prospects for a resumption of capital inflows in the near
\nterm. The deterioration in the regional economic situation is
\nalso adversely affecting the balance of payments. Although the
\nagreements reached in Frankfurt regarding the private sector
\nobligations to banks are expected to ease external pressures ,
\nthe capital account will be substantially deficit. Despite the
\nconsiderable support that is being provided by bilateral and
\nmultilateral sources additional balance of payments support in
\n1998\/99 if $4-6 billion from these sources is needed to close the
\nfinancing gap. At this critical moment we are seeking the further
\nsupport of the international community to ensures the success of
\nour economic program.<\/p>\n
Annex I: Social Safety Net<\/p>\n
* As a result of the economic downturn, open unemployment is
\nrising rapidly, there is increasing and widespread
\nunderemployment and upward pressure on the prices of imported
\nfoodstuffs and medicines is mounting. The incidence of poverty
\nmay rise substantially. The recent drought has aggravated food
\nshortages in some regions. Students are dropping out of school as
\na result of the crisis.<\/p>\n
* The government will ensure that sufficient quantities of
\nessential foodstuffs are made available through the State
\nLogistics Agency (BULOG) to the market, and for the time being
\nwill seek through subsidies, to stabilize the domestic prices of
\nrice, soybeans, sugar, wheat, flour, corn, soybean, meat, and
\nfishmeat, which account for a large part of the expenditure of
\npoor households. In addition, the government will temporarily
\nfreeze the prices of kerosene, gasoline, diesel, electricity and
\nessential medicines.<\/p>\n
* The government will substantially expand its program designed
\nto provide immediate employment for the poor. These programs some
\nof which are financed by the World Bank and the Asian Development
\nBank, will be complemented by a food- for-work program, financed
\nby the UN World Food Program. Food distribution and job creation
\nprograms financed by bilateral grants and concessional loans,
\nwill also be introduced.<\/p>\n
* The government will increase budgetary allocations for the
\nexisting social programs targeted to the children of poor
\nhouseholds. To minimize the decline in school enrollment, the
\ngovernment will initiate, with World Bank and Asian Development
\nBank financial assistance, a block grant program for primary and
\njunior high schools to replace existing school fees. A
\nscholarship program designed to offset private costs of attending
\nschool for junior high school students has also been introduced.
\nIn addition, the government will expand the school lunch program.
\nThese programs are aimed at reaching households in the poorest
\nregions.<\/p>\n
* To strengthen the implementation of social safety nets, the
\ngovernment will form a panel of experts from government and civil
\nsocieties to assist the government in monitoring social safety
\nnet programs and provide advice on implementation. The government
\nwill create an administrative unit to work in conjunction with
\nthe panel and will allocate sufficient resources to ensure the
\nadequate functioning of the unit.<\/p>\n
Annex II: Banking System Restructuring<\/p>\n
* The strategy for achieving a comprehensive solution to the
\nbanking sector is being strengthened in collaboration with the
\nAsian Development Bank, World Bank and IMF. The weak banks will
\nbe addressed through a combination of mergers recapitalizations,
\nand freezings. If banks are frozen, deposits are to be
\nimmediately transferred to a designated recipient bank. The bad
\nloans of the banks will be transferred to an Asset Management
\nUnit (AMU) to be established within IBRA. In all cases,
\ndepositors and creditors will be fully protected in line with the
\nguarantee. Measures are also envisaged that will strengthen
\nrelatively sound banks.<\/p>\n
* Presidential decrees will be issued that will provide
\nappropriate legal powers to IBRA and its AMU by mid-July.
\nSupervisory functions will be returned to BI to leave IBRA free
\nto concentrate on bank restructuring. These provisions are to be
\nincluded in banking law amendments to be submitted to Parliament
\nshortly, In addition to ensure priority attention to bank
\nrestructuring, a Financial Sector Advisory Committee is being
\nestablished , compromising the Coordinating Minister for
\nEconomy, Finance and Industry, the Finance Minister, the
\nDevelopment Planning Minister, the Minister for Industry and
\ntrade, the Governor of Bank Indonesia and the head of IBRA. The
\nCommittee will coordinate actions to eliminate impediments to
\nsound banking system developments. An Independent Review
\nCommittee for IBRA is being established compromising two eminent
\nIndonesians (already nominated) and three foreign members (to be
\nnominated soon)<\/p>\n
* Decisions regarding individual banks will be based on uniform
\nand transparent criteria, drawing on portfolio reviews by
\ninternational accounting firms, and on uniform and transparent
\ncriteria. Such reviews have been completed for the 6 private
\nbanks that were effectively taken over by IBRA in April,
\nportfolio reviews for an additional 32 IBRA banks, and 15 non-
\nIBRA banks are scheduled to be completed by end-July. Portfolio
\nreviews for all other banks will be completed by end-October
\n1998. In addition IBRA will announce soon the modalities of the
\nmerger of two state banks, Bank Bumi Daya and BAPINDO.<\/p>\n
* To strengthen relatively sound banks, schemes will be announced
\nby end-July in which (i) banks that achieve a specified increase
\nin capital will be able to sell their bad loans to the AMU at
\nfair prices, thus improving their risk weighted capital adequacy;
\nand (ii) the government will provide for the two capital,
\ngenerally in the form of subordinated loans, to banks whose
\ncapital has been increased by their owners, Such schemes will be
\ndeveloped drawing on portfolio, systems, and financial reviews to
\nbe undertaken by internationally recognized audit firms.<\/p>\n
* Discussions are also under way with foreign banks regarding
\ninvestments in the banking sector; all restrictions on foreign
\nownership of banks will be lifted as part of the prospective
\namendments to the banking law. As an interim measure, teams of
\nforeign bankers will also be used to strengthen the management of
\nbanks under IBRA's control.<\/p>\n
* All banks are to achieve minimum capital adequacy ratios of 4
\npercent of risk weighed by end-1993, rising to 8 percent by end-
\n1999 and 10 percent by end-2000. Banks that do not meet these
\ntargets will be subject to sanctions imposed by Bank Indonesia.
\nThe minimum capital requirement of Rp 250 billion is being
\nreduced for existing banks to allow them to focus on achieving
\nspecified capital adequacy ratios in their restructuring.<\/p>\n
* The cost of bank restructuring is expected to be higher than
\nestimated in April reflecting the further deterioration in the
\nbanking system. Financing of the cost will be through the
\nissuance of government bonds, many of which are to be index-
\nlinked, provided to Bank Indonesia to clear the liquidity support
\noutstanding to IBRA banks. The remainder, most of which would pay
\nmarket interest rates on a monthly basis, will be used to
\ncompensate banks for the transfer of deposits, recapitalize
\ninsolvent banks that are to remain open, and provide additional
\ncapital to these banks where the owners are themselves adding
\nequity. The estimated budgetary cost in 1998\/99, primarily
\ninterest on these bonds and IBRA's operational costs, is
\nestimated at Rp 15 trillion (1.6 percent of GDP).<\/p>",
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