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.