Huge amount of regional development funds remain idle at BI

The Jakarta Post ,  Jakarta   |  Wed, 06/28/2006 3:55 PM  |  Business

The Jakarta Post, Jakarta

The government is concerned that a staggering Rp 43 trillion (US$4.5 billion) worth of development funds disbursed to regions is lying idle in the central bank, telling regional administrations to spend it for the public's benefit.

Finance Minister Sri Mulyani Indrawati said the stagnant status of the funds, now effectively part of Bank Indonesia's money-market instruments, contradicted the government's recent efforts for higher economic growth through more development spending.

""It is actually ironic to see this year's state budget deficit likely to expand -- to the extent of the government having to make more borrowing to finance it -- but on the other hand, most of the funds already disbursed to the regions have yet to be optimally used for development,"" Sri Mulyani told a hearing Tuesday with the Regional Representatives Council (DPD).

Bank Indonesia Governor Burhanuddin Abdullah recently said that about Rp 40 trillion of disbursed regional development funds had eventually found their way back as investments into the central bank's SBI promissory notes.

This is seen as merely creating additional costs for BI and the government in terms of the investments' interest payments, instead of the economic benefits that the development funds were supposed to generate.

Sri Mulyani urged regional administrations, particularly wealthy ones, to improve their use of the disbursed funds for real sector development projects, as well as the DPD's participation in addressing the matter to their constituents.

She pledged the government would continue improving related policies, particularly in formulating the fairer, speedier disbursement of regional development funds, as well as helping local administrations to increase their own revenue and better their fiscal management.

The government financially supports regions through the state budget in the form of monthly disbursements of proportionally allocated tax and natural resources revenue sharing funds, general allocation funds (DAU), special allocation funds (DAK) and regional autonomy development funds.

For this year, it plans to disburse a total of Rp 59.3 trillion in revenue sharing funds, Rp 145 trillion in DAU funds, Rp 11.5 trillion in DAK funds and Rp 3.4 trillion in autonomy funds.

Responding to the government's request, DPD member Anthony Charles Sunarjo of North Maluku said the institution would urge local administrations to immediately spend all funds for development, with special attention to the agriculture and fisheries sector, as well as for education and health care.

But he said the government also should address the latest bureaucratic wrangle, with proposed regional budgets requiring consultation with the Home Affairs Ministry, which he said resulted in their late approval and implementation.

Many development projects also have been hampered by the reticence of officials to sign off on projects amid the stepped-up anti-graft crackdown. Analysts counter that officials should have nothing to fear if they follow proper procedures, and say their foot-dragging may be an attempt to derail the corruption crackdown. (07)

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