Experts confused over BLBI burden-sharing: BI
Experts confused over BLBI burden-sharing: BI
The Jakarta Post, Jakarta
Foreign banking experts assessing how much of the burden Bank
Indonesia and the government must each share in respect of the
US$13 billion in misused state-funded liquidity support loans,
have questioned why the central bank should shoulder part of the
loss, according to Bank Indonesia Governor Sjahril Sabirin.
Sjahril was commenting on the first meeting he had with the
two foreign experts since they arrived here last week.
"Sometimes foreigners have problems understanding why the
central bank should shoulder the burden of the liquidity support
loans (BLBI)," he told reporters on Thursday on the sidelines of
a seminar discussing the regional autonomy laws.
The two foreigners were John Crow, a former central bank
official from Canada, and Stephen Rod, a former official from the
U.S. Federal Reserves, Sjahril said.
Their first impression over the BLBI issue may therefore be in
favor of Bank Indonesia, which is expected to have to shoulder
part of the responsibility for the misused loans.
The experts are part of a team of banking experts appointed
last month by the government and the International Monetary Fund
(IMF) to settle the long-standing BLBI issue.
The Bank Indonesia liquidity support loans were extended to
local banks to fend off massive runs following a collapse in
banking confidence at the height of the late 90s financial
crisis.
The loans amounted to some Rp 144 trillion (about $14
billion).
A 2000 audit by the Supreme Audit Agency charged that bankers
had misused some $13 billion of the funds, heaping the blame on
Bank Indonesia's lax controls when disbursing the funds.
This increased pressure on the central bank to share some of
the responsibility for the lost funds. But since the debate began
in late 2000, no agreement on a burden-sharing formula has been
arrived at.
The nearly two years of disagreement over to what extent Bank
Indonesia should share responsibility for the misused funds has
come at the expense of the state budget.
As the debate continues, the government must pay the full
interest on the bonds it issued to finance the BLBI scheme.
Bank Indonesia channeled the BLBI funds in return for
receiving state bonds on which it now enjoys interest payments.
If Bank Indonesia were to take responsibility for some of the
lost funds, it would reduce the interest burden on the state
budget.
"From BI (Bank Indonesia)'s point of view, if this is what
they want (burden-sharing), than let's get it over with as soon
as possible," Sjahril said.
For Bank Indonesia, the prolonged debate was casting
uncertainty over its operations as a central bank.
It said its ability to cover the lost BLBI funds was limited,
and demanding more than it could pay would backfire as the state
would have to make good the rest.
An earlier agreement with the central bank saw it taking
responsibility for Rp 24.4 trillion of the lost BLBI funds.
But the deal fell through due to lack of support from
legislators and several key officials in Bank Indonesia.
Stepping up the pressure to end the prolonged uncertainty, the
IMF demanded a new burden-sharing deal in its latest loan
agreement with Indonesia.
In its fourth Letter of Intent (LoI) to the IMF last year, the
government promised to settle the issue by last month.
Still, the details of the team's work and the local banking
experts whom the government appointed remain vague.
Officials of the Ministry of Finance, which selected the local
experts, were unavailable for comment about the team.
A senior Bank Indonesia official said there were two local
experts, while Sjahril mentioned three.