Kwik, experts to discuss ways out of hugh debts

Kwik, experts to discuss ways out of hugh debts

Dadan Wijaksana, The Jakarta Post, Jakarta

The National Development Planning Agency (Bappenas) is planning
to hold a one-day meeting with about 20 independent financial
experts on Monday to seek alternative solutions to the huge
domestic debt burden of the government, according to its Chairman
Kwik Kian Gie.

Kwik, who is also State Minister of National Development
Planning, was quoted by Antara as saying on Friday that the huge
debt burden was a very serious problem.

The government issued more than Rp 600 trillion (US$67
billion) worth of bonds in the late 1990s to bail out troubled
banks and recapitalize them. Some Rp 430 trillion of the bonds
were injected into the banks. The state budget is covering the
interest on these bonds, which is the main cause of the huge
deficit of around 2.5 percent of gross domestic product this
year.

This huge debt could potentially create a fiscal disaster.

Kwik said that the experts would also seek ways of how to
redeem the bonds from the banks before they were sold to private
investors.

He added that the government should postpone its plans to sell
the banks before the bonds were taken out or greatly reduced from
them so that they would no longer become a burden on the state
budget once the banks had been transferred to the new private
owners.

Kwik, a former chief economics minister, has openly criticized
various economic policies of the current economic ministers. He
has also called on the government not to extend the International
Monetary Fund's (IMF's) economic reform program here, supposedly
to end in November 2002. But Minister of Finance Boediono said
that the government had extended it for another year.

The IMF has demanded the government sell its stake in three
banks this year. They are Bank Niaga, Bank Danamon and Lippo
Bank.

Senior economic ministers are expected to hold a meeting on
Sunday to determine whether to proceed with the planned sale of
the government's 51 percent stake in Bank Niaga to strategic
investors due to low bids.

In March, the government managed to sell a 51 percent stake in
Bank Central Asia (BCA), the country's largest retail bank, to a
consortium led by U.S. investment firm Farallon Capital, for Rp
5.3 trillion.

BCA holds some Rp 60 trillion worth of government bonds. For
this year, the state budget is paying around Rp 5 trillion in
interest to the bank.

Kwik has questioned the logic of the government selling BCA,
as it must pay a huge amount in interest to the bank's new owner
each year.

The sale of government shares in the above banks is part of
conditions for the IMF to disburse its next loan tranche to the
country.

The IMF is providing a $5 billion loan package for Indonesia.

Any failure to meet the conditions set by the IMF could cause
a delay in the disbursement of the loan, which could affect
investor sentiment on the economy.

The IMF has argued that the divestment of government shares in
the banks would bring in credible international investors,
igniting capital inflow and eventually reviving foreign
confidence in the country's banking sector.