Wed, 05 Jan 2000

BI officials should not disrupt market: Ministers

JAKARTA (JP): Senior ministers say Bank Indonesia has no reason to debit the account of commercial banks that received the disputed Rp 51.7 trillion of emergency liquidity credits from the central bank.

Coordinating Minister for Economy and Finance Kwik Kian Gie and Minister of Finance Bambang Sudibyo said separately on Tuesday Bank Indonesia had received government bonds totaling Rp 164.5 trillion to cover most of the emergency credits it had extended to commercial banks since late 1997, and, therefore, had no need to debit the recipient banks.

"What do they want? Do they want to create chaos? Do they? They do not need to debit the (commercial) banks' account. What business is it of theirs? This creates chaos, doesn't it?," Kwik told journalists after meeting with President Abdurrahman Wahid.

Earlier, Bank Indonesia's governor Sjahril Sabirin threatened to debit the account of commercial banks which owed a liquidity debt to the central bank if the government did not take over the debt.

If that happened, Sjahril said, the economic cost for the government would be greater than if it took over the debt itself.

Speaking to reporters at his office, Bambang said if Bank Indonesia debited the accounts of the indebted commercial banks it would force those banks to stop their operations and hence disrupt the country's payment system.

He therefore called on BI officials not to issue damaging statements in the name of Bank Indonesia as it would only undermine the central bank's credibility.

"BI can not be and will not be taken as a hostage like that," he said. "BI can not be used as a cover by its people."

Bambang said he may sue the media, experts and officials who make statements that could result in higher government costs to recapitalize the central bank.

On Monday, Bank Indonesia's deputy governor Miranda S. Goeltom warned the forced announcement of the damning audit report on BI by the Supreme Audit Agency could affect BI's Yankee bonds, its credibility to guarantee letters of credits issued by local commercial banks and its ability to absorb government bonds used to recapitalize the country's rotten commercial banks.

Bambang said the government would continue to pursue those who had a role in bankrupting the central bank with the irresponsible disbursement of huge liquidity supports to commercial banks.

"Investigations into those people will continue, but Bank Indonesia as an institution must be saved," he said.

He noted the central bank's emergency liquidity loans had supplied the largest cash flow in the country since 1997. And he suspected that the loans were disbursed "through a pipeline with a very weak control system".

"If there are corruptions, probably the largest will be there (in the disbursement of the emergency liquidity credits) because that is the largest amount and disbursed through a weak control mechanism," he said.

Bambang said the problem was not whether or not the government accepted the disputed Rp 51.7 trillion in BI's liquidity supports, because the financial impact on the government would be the same.

If the government agreed to take over the debt, he said, the government would have to issue bonds to cover it. And the government had done that. Likewise, if the government rejected the debt, it would still have to issue bonds to recapitalize the central bank as a result.

The problem, Bambang said, rested on the accountability of the central bank in disbursing such a huge amount of money with little control.

He said the government had tasked the Development Finance Comptroller to audit commercial banks that had received BI's emergency liquidity supports.

The government had also asked the House of Representatives to task the Supreme Audit Agency to conduct investigative audits on BI over the disbursement of the emergency loans.

"We need to clarify whether or not there were irregularities in their disbursement. People need to know that." (prb/rid)