Govt prepares debt management bill to prevent of loans

Govt prepares debt management bill to prevent of loans

Rendi A. Witular, The Jakarta Post, Jakarta

With the amount of debt currently at an alarming level, a bill is
being drafted by the government on debt management in a bid to
prevent loans from being abused, such as for political purposes,
an official has said.

Bank Indonesia's head of foreign debt, Dian Ediana Rae, said
the bill would include clear-cut procedures in securing,
channeling and monitoring loans, and the need for setting up a
semi-independent agency to concentrate on dealing with loans.

"It will be designed to manage the country's loans with a high
level of prudence, effectiveness and accountability. With the
bill, we expect there will no longer be political reasons in
seeking new loans," said Dian at a seminar on Wednesday, adding
that financial concerns should be the only reason to request a
loan.

The bill is being drafted jointly by representatives from the
central bank, the Ministry of Finance and the National
Development Planning Agency (Bappenas) and will be delivered to
the House of Representatives for deliberation soon.

According to Dian, the bill should immediately be endorsed as
it was deemed necessary by the law on international relations,
and in view of the huge debts -- both foreign and domestic -- the
country owes at the moment.

"The management of loans from upstream to downstream should
all be meticulously regulated since the implications are huge for
the public. Failure to provide a legal frame for managing loans
would place the country in a debt trap," he said.

As of September last year, the government's foreign debt
totaled some US$78 million as well as some $60 billion in
domestic debt -- according to central bank data -- with some Rp
46 trillion ($5.11 billion) due to mature this year.

Many reports by research agencies and non-governmental
organizations have alleged that debt embezzlement reached up to
30 percent of total loans, mostly due to lack of supervision and
transparency by the government.

The massive debt is partly a result of the government's
incompetency to effectively manage its loan resources, since the
decision for obtaining loans are mostly based on political
considerations rather than on long-term financial calculations.

"A government often seeks loans as the easiest way to secure
its five-year term, which then burdens its successor, causing not
only skyrocketing debt but also poor management," said Dian.

A lack of coordination between government ministries and
agencies in managing debt also renders the disbursement of some
loans ineffective and often cannot be translated into productive
results.

Therefore, a special agency should be established to better
coordinate and manage loans. The agency, Dian went on to say,
should also be tasked with negotiating the interest rates of
loans, setting up an efficient channeling mechanism, supervising
loan disbursement and ensuring transparency reqarding loans.