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The government is set to allow ministries to borrow from
domestic banks to finance particular types of project, such as
infrastructure and weapons procurements, as it aims to make better use
of local financing sources after the dissolution of the Consultative
Group on Indonesia (CGI).
"We will later determine the types of the project. We need to be
prudent about this as it relates to the financing of the state budget,"
National Development Planning Agency chairman Paskah Suzetta said
Monday.
The government is currently drafting a regulation on domestic borrowing
that is aimed at developing alternative sources of budget financing
besides the issuing of treasury bills and foreign borrowing, he said.
Under to the government's latest economic policy package, the draft
regulation is expected to be ready in July.
Paskah said the new borrowing rules would apply only to strategic
projects, such as the building of ports and highways. "Projects
pertaining to the weapons industry will also be eligible as the
government is ultimately the buyer."
The ministries would also be required to involve the private sector in
such projects through public-private partnerships.
Paskah said the government would continue to seek development funding
from domestic sources as this was easier and less risky than borrowing
from international lenders.
"It is better as long as it doesn't have an adverse effect on the
private sector," he said.
The Capital Market and Financial Institutions Supervisory Agency
(Bapepam-LK) has already issued regulations allowing local
administrations to sell bonds to plug their budget deficits.
Finance Minister Sri Mulyani Indrawati said she hoped that local
governments would use the bond proceeds to finance infrastructure
projects.
The government plans to expand the budget deficit from 1.1 percent this
year to 1.8 percent of GDP next year to help achieve growth of between
6.6 percent and 6.9 percent.
"The proposed borrowing should not bring the total level of borrowing
to above the target of 39 percent of GDP," Paskah said.
Besides the new budget financing scheme, the government also plans to
set up an Indonesia Infrastructure Fund to finance infrastructure
projects.
It is hoped that the insurance and pension fund industries will
participate in the scheme.
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