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.