Govt debt to increase by Rp 500t due to bond reprofiling: Kwik
The Jakarta Post, Jakarta
The government's domestic debt will increase by Rp 500 trillion (US$55 billion) as a result of the bond reprofiling scheme agreed upon by a commission of the House of Representatives, according State Minister for National Development Planning Kwik Kian Gie.
Kwik said the reprofiling scheme -- which pushes back bond maturity dates to between 2010 and 2020 -- means the government will have to cover Rp 1,500 trillion worth of bonds until 2020, instead of the initial figure of Rp 1,000 trillion.
"This increase was based on assumptions that take into account estimated developments in Bank Indonesia's interests rates and the rupiah," Kwik said during a hearing with House of Representatives Commission IX for financial affairs on Wednesday, as quoted by detik.com.
According to Kwik, the situation is such that Indonesia's economy is on the brink of collapse. It is therefore inevitable that the government will continue to seek more funds from the international community to sustain its budget.
Kwik fell short of outlining the assumptions on which he based his calculations.
He simply said these were preliminary calculations and that he would later send a full report not only to the government, but also to the World Bank, the Consultative Group on Indonesia, the International Monetary Fund and the Asian Development Bank.
Kwik's remarks should renew concern of how the country is going to solve its massive public debt problems.
Currently, the government's domestic debts, all in the form of bonds, amount to some Rp 660 trillion, including Rp 430 trillion worth of recap bonds held by nationalized banks.
That staggering figure comes on top of about $72 billion in foreign debt.
The payments for these debts eat up a large portion of the country's annual state budget.
To help ease this burden on the budget, Commission IX for financial affairs approved on Monday the reprofiling scheme. This scheme allows the government to replace a portion of the recap bonds, which are held by four state banks and are due to mature between 2004 and 2009, with bonds with longer maturity periods.
The four banks are Bank Mandiri, Bank Rakyat Indonesia, Bank Tabungan Negara and Bank Negara Indonesia. The four banks currently hold a total of Rp 231.62 trillion worth of bonds.
Under the reprofiling scheme, around Rp 175 trillion of the bonds will have their maturity profile shifted to between 2010 and 2020.
Without this scheme, the government would be facing an uphill task in repaying its debts, especially when most of the bonds begin maturing next year.
However, Kwik said the plan was not only financial engineering aimed simply at shifting the problem to future generations, but would also increase the total obligation of the government.
Detik.com reported that Kwik plans to send a letter to House leaders, asking them to annul the decision made by Commission IX.
Kwik has been publicly and repeatedly opposed to various policies issued by his fellow economics ministers.
And the one issue he has been most critical of is the problems arising from the recap bonds held by nationalized banks.