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The government will issue guarantees to domestic banks to
help encourage more bank lending to finance infrastructure projects and
armaments procurements, a minister has said.
"We must provide them with letters of guarantee. After all, we also
provide such guarantees when taking out foreign loans," State Minister
for National Development Planning Paskah Suzetta said Wednesday.
Meanwhile, Coordinating Minister for the Economy Boediono said the
guarantees, to be issued in respect of multi-year infrastructure
projects, would provide greater certainty and instill more confidence
in the banks when considering whether to extend loans.
Paskah said his ministry would arrange a meeting with the country's
banks soon to discuss the issue.
"Some of them have individually agreed to finance the defense industry,
including procurements from firms such as PT Dirgantara Indonesia, PT
PAL and PT PINDAD," he said.
Paskah said his ministry had received applications to take out foreign
loans from government departments and local governments so far this
year worth a total of US$40 billion to finance development projects.
Paskah added that his ministry was currently deciding which of the
proposed projects could actually be financed from local sources.
"We will be very prudent in assessing the projects," he said, stressing
that the government would prioritize local financing and optimize
budget spending before turning to overseas borrowing.
He explained that the government's guarantees would provide assurance
to banks in disbursing loans so that they would not have to worry
unduly about breaching legal lending limits (LLL).
After dissolving Indonesia's main grouping of creditors and donors, the
Consultative Group on Indonesia (CGI), last week, the government has
pledged to rely more on its own resources to fund the country's
development.
Paskah said the government hoped to further lower its debt to GDP
ratio, which stood at 42 percent last year.
"We will try to reduce the number of new (foreign) loans taken out," he
said.
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