Debate on new bond bill kicks off

Debate on new bond bill kicks off

The Jakarta Post, Jakarta

The government and the House of Representatives started
discussions on Monday on the new draft law on bonds that is
intended to provide a strong legal basis for the government to
issue new bonds to help out the country's banking sector.

The discussions, which will involve the Ministry of Finance
and the House's Commission IX for financial affairs and the state
budget, are expected to be completed during the current House
session which ends on March 28, Minister of Finance Boediono
said.

The passage of the law on time would give the government the
legal basis for refinancing Rp 3.9 trillion (some US$380 million)
worth of bonds set to mature in July, he said.

Refinancing old bonds means issuing new bonds to cover the
redemption of the maturing ones.

At the meeting, it was revealed that all the factions on the
commission had expressed concerns over the huge pressures that
the state budget had to bear each year just to repay the interest
on government bonds.

This year, the state budget has had to allocate Rp 59.2
trillion for interest payments alone, with most of the money
going to the local banks the government bailed out at the height
of the financial crisis in 1998.

More than Rp 600 trillion worth of bonds were issued by the
government at that time to avoid the total collapse of the
country's banking sector.

To date, however, the banks have not managed to fully recover
and are still heavily reliant on revenue from government bonds.

With the slow recovery in the banking sector, the government's
ability to manage its domestic debts is essential so as not to
put more strain on the budget.

The debate is expected to continue today with the House
scheduled to listen to the opinion of the central bank.