T

he City Council has called on the Jakarta administration to reconsider its plan to issue bonds to finance
infrastructure projects.

Five of the eight political factions at the council rejected the city’s plan during a plenary session on Monday.

The city is set to issue the bonds next year, expecting to rake in up to Rp 1.7 trillion (US$192.1 million).

Maman Firmansyah of the United Development Party (PPP), said the bond issuance could increase the burden on the city’s finances.

Maman said that the primary concern was that having to pay interest to the bond holders would put more strain on the city budget.

“With the interest reaching Rp 127 billion per year, we are genuinely worried,” he said.

Maman said that it would be better for the administration to boost efficiency in its disbursement of the city budget to save more money.

The Greater Indonesia Movement (Gerindra) faction also rejected the plan.

“A large amount of funding will be needed to pay the interest; it would be better to use the money to build more public health centers or schools,” Gerindra councilwoman Endah Pardjoko said.

The City Regional Finance Management Body (BPKD) had announced that the bonds would be used to finance four city projects; the Pasar Rebo Regional Hospital in South Jakarta, the Casablanca liquid waste management facility in East Jakarta, low-cost apartments in Penjaringan in North Jakarta and the Pulo Gebang Bus Terminal in East Jakarta.

BPKD said that the Jakarta administration had met all conditions set by the central government to issue both regional and municipal bonds.

According to a 2005 regulation, regional bonds and loans should not exceed 75 percent of the city’s revenue from the previous year. In addition, the city must maintain a minimum 2.5 percent debt service coverage ratio, with the administration obtaining permission from the Finance Ministry.

Wanda Hamidah of the National Mandate Party (PAN) said that the city could use surplus from this year’s budget, which was predicted to reach Rp 3.68 trillion from a total budget of Rp 31.7 trillion.

“Jakarta doesn’t need these bonds yet. Why make more debt if we still have money in our coffer,”
Wanda said.

The city had a total of Rp 4.9 trillion ($563.5 million) in surplus from last year’s budget of Rp 26.71 trillion.

Some Rp 2.7 trillion of the surplus has been included in the 2011 Budget and Rp 600 billion has been spent on civil servant allowances and the City Hall’s phone, water and electricity bills.

While the remaining Rp 1.6 trillion surplus was used to buy 50 additional TransJakarta buses, and as additional funds for the construction of the Pulo Gebang Bus Station and land purchases for a new sports stadium in South Jakarta.

— JP/Andreas D. Arditya