Government, BI form joint team to end dispute over loan

JAKARTA (JP): Coordinating Minister for Economic Affairs Rizal Ramli said on Wednesday that the government and Bank Indonesia had formed a joint team to verify the disputed amount of the bank liquidity support facility.

Rizal said that the team was expected to complete its work next week.

Speaking to reporters following a closed door meeting with central bank officials and other related senior government officials, he said that the central bank and the finance ministry continued to disagree over the amount of the loan facility that must be shouldered by the government.

"The discussion on the amount has been tough," he said.

The government via Bank Indonesia channeled some Rp 144.5 trillion (US$15.88 billion) in emergency loans between 1997 and 1999 especially to help domestic banks avoid bank runs. The loans were supposed to be used only for repaying depositors.

But the Supreme Audit Agency (BPK) has recently revealed in its audit report that some Rp 138.4 trillion of the loan facility had been misused by the banks including for currency speculation and financing affiliated businesses. BPK said that this was partly due to weak supervision by the central bank.

The government is supposed to repay Bank Indonesia for the liquidity support facility by issuing bonds to the central bank. But the government said it would not cover that part of the loans which were misused.

On the other hand, the central bank has insisted that the government must pay the full amount. It also maintained that the disbursement of the loan facility was in accordance with government policy.

Forcing Bank Indonesia to cover the abused portion of the loan would send the central bank into bankruptcy.

The talks have been dragging on for almost a year and have consumed a lot of energy and time of both government and central bank officials. The misuse of the loan facility became a high profile political issue.

The House of Representatives has instructed the government and Bank Indonesia to settle their dispute by November 10, but Rizal demanded more time.

"The problem has been dragging on for a year and they wanted us to settle this in 10 days. Life is really unfair. We need more time," Rizal said.

The owners of banks which received the liquidity support facility have, in many cases, transferred assets to repay the loans.

But the government is now pressing several former bank owners, the largest recipients of the loan facility, to transfer more assets because the assets they pledged earlier turned out to be insufficient to cover their obligations.(rei)