Kalla urges regions to start spending development funds

The Jakarta Post , Jakarta | Sat, 07/01/2006 4:31 PM | Business

The Jakarta Post, Jakarta

Vice President Jusuf Kalla urged the country's local administrations Friday to immediately start spending the investment funds they had been given on planned projects, or at the very least disburse them to farmers as loans.

""Rather than let the funds sit idle, the administrations could convert them into loans that would benefit the people. I believe, however, that these decisions (to invest the funds in central bank instruments) cannot be absolutely categorized as wrong provided that the projects are commenced soon,"" said Kalla.

He said he believed that the local administrations were just adopting a ""safety"" approach by keeping the funds invested in central bank SBI notes pending the completion of the tender processes for the planned projects.

The government is concerned that Rp 43 trillion (US$4.5 billion) worth of development funds disbursed to the regions have not been used for their intended purposes, but have rather been invested in central bank instruments, thereby undermining the government's efforts to achieve higher economic growth through greater capital spending.

Such a situation would only result in additional costs for Bank Indonesia and the government in the form of interest payments, instead of the economic benefits that the capital funds were supposed to generate.

However, Kalla did not say whether any sanctions would be imposed on governors, regents or mayors who refused to put the funds to good use. -- JP

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