`BI to suffer budget deficit in 2003, 2004'

Dadan Wijaksana, The Jakarta Post, Jakarta

Bank Indonesia expects a deficit in its budget this year and next, as it is unlikely to generate enough income to enable it to keep up with increasing expenditures, said Central Bank Deputy Governor Bun Bunan Hutapea.

"This year, for example, we forecast Rp 13.4 trillion in total revenue -- generated from managing foreign exchange reserves, credits and others -- while our expenditures are estimated at Rp 22.1 trillion," Bun Bunan told a hearing with lawmakers on Thursday.

He said that expenditures mostly came from expenses in executing monetary operations, servicing foreign loans and supervising the banking sector.

Consequently, while for this year the central bank would not need additional funding to help cover the deficit, that would not be the case for next year, he said.

Bun Bunan reiterated that the central bank might need about Rp 5 trillion from the government next year in order to maintain the role of Bank Indonesia.

The government is expected to inject the funds as part of a burden-sharing mechanism to cover the huge cost of the Bank Indonesia liquidity support facility, worth Rp 144.5 trillion, which was injected into troubled banks in the late 1990s.

Under the mechanism, the Ministry of Finance would issue promissory notes to the central bank. The ministry would only pay interest on the notes if Bank Indonesia's capital falls below 5 percent of its monetary obligation. If Bank Indonesia's capital ratio is above 8 percent, the surplus will be used to retire the notes.

However, the House of Representatives has not yet approved the deal.

Under the scheme, Bank Indonesia would need additional funding of about Rp 5 trillion for 2004 to retain its capital ratio above 5 percent, Bun Bunan said last week.

"That's why we have been requesting that this case be resolved soon so it can benefit us all," he said.