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Govt may borrow from banks to patch deficit
The government may borrow money from Indonesian banks this year to cover its budget deficit of Rp 94
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The government may borrow money from Indonesian banks this year to cover its budget deficit of Rp 94.5 trillion (US$10.16 billion), a ministry official says.
The Finance Ministry's director general of debt management Rahmat Waluyanto said Friday the government had wrapped up a regulation on domestic loans, which would allow the government to borrow money from local banks.
The ministry will submit the regulation to President Susilo Bambang Yudhoyono immediately for endorsement.
"We can borrow money from the banking sector starting from next year. However, we can hasten it if need be," Rahmat said.
The government plans to borrow money from local banks to fund some programs, including the procurement of weaponry to replace the military's aging equipment.
Rahmat said under the regulation, the government could also borrow money from local governments that were reaping profits.
Some areas in the country are enjoying windfall profits due to the rise in global oil prices, which now hover above $130 per barrel.
Bank Mandiri chief economist Martin Panggabean told The Jakarta Post on Sunday that the banking sector was likely to respond positively to the government's plan to borrow money from them as "local banks are in excess of liquidity".
Mandiri, a state-owned bank, is the country's largest bank by assets. Its net profit in the first quarter of this year rose to Rp 1.39 trillion, a 35 percent increase from Rp 1.03 trillion in the same period of 2007.
Martin said the government had been borrowing money from foreign banks to issue bonds, so "they can also borrow money from local banks".
He said the banking sector's loan-to-deposit (LDR) ratio was now above 60 percent, meaning local banks were able to lend money to the government.
Bank Negara Indonesia (BNI) economist Ryan Kiryanto told the Post it was "about time" the government minimized the amount of foreign loans, and shifted to domestic loans.
However, he said, the government should present feasible and bankable projects to the banks so that they would be willing to disburse loans.
"Banks will be interested in funding government projects as long as they are feasible and bankable," Ryan said.
He also said banks needed to comply with the maximum limit of credit disbursement to avoid the risk of non-performing loans (NPLs).
"Banks can form a syndicate or a consortium if they want to fund large-scale government projects," he said.
BNI in the first three months this year raised its net risk coverage ratio to prevent credit losses.
