Govt to restrict foreign loans for state firms

The government says it will be more selective in handing out foreign loans or subsidiary loan agreements (SLA) to state-owned companies.

“SLA will increase our foreign debts. So, ideally, we would need to be more selective in the future,” Finance Minister Agus Martowardojo said Monday, as quoted by tempo.com.

He explained that only healthy state firms would be entitled to receive the loans. As an alternative source of funds, Agus suggested that state firms propose credit facilities to banks, for both commercial and export credits.

The idea of a more selective distribution of foreign loans was supported by Coordinating Economic Minister Hatta Rajasa, who suggested that the SLA be abolished.

In the 2012 state budget, the country’s deficit reached 1.5 percent of the total Gross Domestic Product (GDP). The deficit was covered by foreign and home loans in the form of the issuance of the government bonds.