BPKP to audit central government loan to regions

BPKP to audit central government loan to regions

Fitri Wulandari, The Jakarta Post, Jakarta

The Development Finance Comptroller (BPKP) is investigating
possible misuse by regional governments of investment funds
provided by international financial agencies through the central
government.

The audits follow the failure of the regional governments to
repay a total of Rp 5.4 trillion (US$606 million) in debts,
including interest, principal payments and fines, over the past
six years.

"The BPKP is conducting an investigative audit into possible
irregularities in the use of the funds," said Paskah Suzetta, a
member of the House budget committee on Monday, adding that the
audit came at the request of the government.

The BPKP met on Monday with the regional governments as
represented by the Association of Regency Administrations, the
Association of Indonesian Governors and the Association of
Municipalities to discuss the issue.

The regional governments' representatives asked for cuts in
their debts to ease their financial burdens.

According to Paskah, most regional governments have invested
the regional development investment (RDI) funds in building
infrastructure, such as markets and transportation facilities.
Some regions channeled the funds to their own water companies.

Paskah said the results of the BPKP investigation would
determine the next step regarding the repayment of the debts. The
debt may be rescheduled, restructured or cut.

The RDI funds are provided by international lending agencies,
such the World Bank and International Monetary Fund, to promote
investment in the regions.

However, the funds are channeled through the central
government because under the prevailing laws the regions the
regions are not allowed to directly take out foreign loans. The
funds are thus treated as central government loan's to the
regions.

R. Nuriana, the West Java governor, argued during the meeting
that many regions had failed to repay their debt because they
were financially incapable of meeting their obligations.

"We thus ask the government for such a policy (debt reduction,
rescheduling and restructuring) as each region has a different
ability to repay its debt," he said.

While admitting that many regions could not pay back the RDI
funds to the central government, Nuriana said that the BPKP audit
was necessary to see if it this was the result of mismanagement
or irregularities.

The regions also hoped that the current inability of many
regions to repay their debts should not prevent them from
requesting new loans from the central government in the future,
the governor said.

The RDI funds for 2001 stood Rp 7.3 trillion while for 2002,
they were slightly down at Rp 6.3 trillion.