Boediono defends debt discount policy
The Jakarta Post, Jakarta
Minister of Finance Boediono said on Monday there was no "political motive" behind the government's latest policy to offer huge discounts to companies with debts to the state.
Boediono said that the policy was merely aimed at easing the burden of the indebted small- and medium-sized enterprises (SMEs) in a bid to accelerate the debt repayment process.
He explained that the settlement of the debts would not only allow the government to recover the state funds, but should also make the SMEs more bankable, which in turn would help accelerate economic growth.
"The objective to provide the discount is purely aimed at easing the burden of the indebted SMEs. It is expected that the policy will help revive the real sector," he said.
Boediono was commenting on the government policy announced over the weekend that it would provide a discount of between 25 percent and 50 percent for debt principal and the writing off of interest rate arrears and penalties. The new policy comes at a time when the current outgoing government is about to end its mandate, and so again raises suspicions of a political motive behind the move.
The facility was being offered to debtors who less than Rp 10 billion (about US$1 million) in debt, which have challenged an earlier debt settlement mechanism imposed by the now defunct Indonesian Bank Restructuring Agency (IBRA) in the courts.
The debtors initially borrowed the money from local banks. But in the wake of the late 1990s financial crisis, the government, via IBRA, took over the troubled banks and their debt. IBRA, which had the task of collecting the money owed by the debtors, was officially closed down in February 2004, but the government set up a team to deal with the unsettled debts.
Boediono said that the new policy was launched at a time when the current government was ending its mandate because the team was given a deadline until January 2005 to complete IBRA's unfinished debt restructuring work.
He also said they wanted to prevent abuse of the debt discount policy, so the government planned an audit mechanism by an independent auditor.