Govt ready to cover maturing bonds: Boediono
Govt ready to cover maturing bonds: Boediono
Dadan Wijaksana, The Jakarta Post, Jakarta
The government would use part of the proceeds from the sale of
assets by the Indonesian Bank Restructuring Agency (IBRA) to
cover bonds worth Rp 3.9 trillion (about US$415 million) maturing
in July, Minister of Finance Boediono said on Friday.
He said that the agency had collected enough funds to cover
the payment of the maturing bonds.
"I don't know the exact number, but Pak Ritonga told me that
the amount is enough," Boediono told reporters referring to the
state budget director general Anshari Ritonga.
Boediono made the statement after the House of Representatives
budget committee rejected on Thursday the government's proposal
to use excess funds from the 2000 state budget to cover the
maturing bonds, which reports said were being held by Bank
Central Asia (BCA).
The government injected some Rp 430 trillion worth of bonds
into ailing banks in the late 1990s to recapitalize them.
Boediono's remarks should also provide a relief to banks
holding the bonds that the government would not roll-over the
bonds.
IBRA has been targeted to rake in some Rp 35 trillion in cash
this year from the sale of its various assets taken over from
ailing banks and indebted bank owners.
The cash is supposed to finance the state budget deficit,
estimated at around Rp 42 trillion. The government is also
expecting some 6.5 trillion in proceeds from the privatization
program.
The move by the government to use part of the IBRA asset sale
proceeds to cover maturing bonds means that the agency would have
to raise a greater amount of cash this year, thus putting greater
pressure on it for a fire sale, selling the assets at huge
discount.
Initially, the government planned to issue the so-named T-
bills to replace the maturing bonds.
However the efforts turned sour as the House indicated it
could not approve the sovereign debt securities law, which will
serve as a legal basis for the issuance of the T-bills, before
July.
T-bills is another kind of short-term bonds with maturity
period of between 6 months and a year.
The issuance of T-bills should be critical in securing the
country's fiscal sustainability in the long run. A large portion
of the bank recapitalization bonds will start maturing in 2004,
all the way to 2009.
Analysts said that the country is facing a risk of fiscal
disaster if the government fails to seek measures to resolve its
huge domestic debt problem.
For 2003, the amount to be matured will increase to around Rp
25 trillion.
The figure will get bigger and bigger in years to come,
reaching its peak in 2009 when the government will have to cover
the redemption of around Rp 100 trillion in maturing bonds.
This huge public debt faced by the government has been a hot
topic lately, especially when the government so far has failed to
deliver a convincing way to manage and restructure these debts.
Huge allocation for debts payments that the state budget has
to allocate each year has limited the portion of spending for
development programs.
The state budget this year has to allocate Rp 60 trillion for
the recap bonds interest payment, or make up of some 73 percent
of the this year's payment for debts.
The country's total debts to December last year stood at
$134.8 billion, or more than 80 percent of predicted GDP of $160
billion.
GDP measures total value of goods and services produced in a
year.