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SMI looks to increase financing for local governments to reduce dependence on state budget
Few local governments have taken advantage of the financing opportunities provided by SMI, with most using the funds to build roads and hospitals.
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Fishermen pass under the Barelang Bridge in Batam, Riau Islands. Local governments still mostly rely on state budgets to finance infrastructure projects such as bridges and roads (Antara/Irwansyah Putra)
S
tate-owned infrastructure financing company PT Sarana Multi Infrastruktur (SMI) intends to expand its financing for regional administrations to give local governments more funding options to finance their infrastructure projects.
SMI president director Edwin Syahruzad said most local administrations still relied on fund transfers from the central government and locally generated funds (PAD) to finance their development projects because of a lack of awareness of other funding options.
“Most local administrations in Indonesia still rely heavily on their regional budgets to finance infrastructure projects such as for transportation, drinking water systems and waste management,” he said during a media gathering in Thousand Islands, Jakarta, on Oct. 10.
As of September this year, he said, SMI’s outstanding loans for regional administrations totaled Rp 2.73 trillion (US$192.99 million), up 87.42 percent year-on-year (yoy) compared to the same period last year. Despite the exponential growth, the figure accounted only for 4.67 percent of the company’s overall outstanding loans, which totaled Rp 58.48 trillion as of September 2019.
He said only a few local governments had taken advantage of other financing opportunities provided by SMI and that most used the funds to build roads and hospitals. The regional administrations that have taken out loans from SMI include Manado in North Sulawesi and Penajam Paser Utara regency in East Kalimantan, which will host part of Indonesia’s new capital.
The Financial Services Authority (OJK) has issued three regulations since late 2017 to encourage local governments to issue municipal funds to boost their financing capacity. Since then, the OJK has also actively promoted the advantages of the financing option in a number of regions across the country.
According to the OJK, a number of local governments, such as the provincial administrations of Central Java, West Java and Jakarta, have expressed interest in issuing municipal funds. However, none have realized such plans.
