Govt debt to increase by Rp 500t due to bond reprofiling: Kwik
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.