Bank Indonesia to incur deficit, again

The Jakarta Post, Jakarta

For the second consecutive year, the central bank is expected to suffer a deficit next year, attributable to the soaring costs of keeping its monetary operations intact.

As stated in a report presented on Wednesday to the House of Representatives' Commission XI on financial affairs, the central bank predicted a deficit of around Rp 9.4 trillion (US$1.03 billion) next year.

This figure came from an estimate of full-year revenue of Rp 14.3 trillion, as against Rp 23.7 trillion in total expenditure.

If in fact it happens, it would be BI's second consecutive annual deficit. This year, Bank Indonesia is expected to incur a deficit amounting to Rp 14.4 trillion.

Bun Bunan Hutapea, a Bank Indonesia deputy governor, has said that this year alone the bank would likely spend Rp 13 to Rp 14 trillion to cover interest payments on large deposits made by the local banking sector in BI promissory notes.

The deposits usually stand at between Rp 130 to Rp 160 trillion.

In 2003, the central bank enjoyed a surplus of Rp 1 trillion, thanks in part to the repayment of the central bank liquidity support facility by the government.

Elsewhere, despite the deficit, the report added that the central bank's capital ratio against its monetary operations will stand at 3.97 percent, which means the government will not have to inject funds to cover BI's capital ratio shortfalls.

A settlement agreement signed by the government and central bank last year -- called the BLBI agreement, says that if BI's capital ratio for its monetary operations falls below 3 percent, then the government has to cover the shortfall.