Jakarta, Jan 3: The IMF said on Monday Indonesia's beleagured central bank would need some recapitalisation, but that there was nothing in a critical audit of the bank which would prevent it from meeting its daily obligationsBank Indonesia itself said separately that the country's overseas bonds and bank bailout scheme could be hurt by the recent state audit, which had found the bank's finances so problematic it might have to be recapitalised.The central bank also said the audit news could push up the cost of financing for Indonesian firms raising funds overseas and might raise concern over the bank's ability to guarantee trade financing. Finance minister Bambang Sudibyo had said on Friday that the International Monetary Fund had agreed to a government proposal to recapitalise the bank.
The IMF is leading a more than $45 billion interational rescue package for Indonesia. It is due to sign its latest letter of intent with Jakarta this month. Sudibyo said the recapitalisation would happen soon ifparliament approved. He also said the central bank would soon conduct comprehensive corrective action regarding its personnel, organisation, internal supervision, systems and the supervision of banks.
IMF Indonesia representative John Dodsworth told reporterson Monday that: "From everything I know about the audit, I think the corrective actions would include some recapitalisation of Bank Indonesia," which would be funded through government bonds.
"The exact amount, however, needs further review," he said. The IMF would work with the government to complete astrategy by mid-January to help Bank Indonesia, Dodsworth said.
He said the audit had not found anything that would preventBank Indonesia meeting its daily obligations. The audit by the Supreme Audit Agency (BPK) was released toparliament on Friday.
Commenting on the audit's possible impact, Bank Indonesiadeputy governor Miranda Goeltom told reporters earlier that: "Bank Indonesia issued (a) yankee bond overseas, (the news) could hurt its prices or...could push up the bond rates which are now used as benchmark for corporates (fund raising) overseas".
She said the yankee bonds that could be affected amountedto around $400 million, apart from other bonds issued overseas by Indonesian corporates.Goeltom said the news had not had any significant immediateimpact because Financial markets were still slow due to the holiday mood, but it would start to have a more meaningful effect next week when the markets are active again.The central bank yankee bond rate was still 480 basispoints above U.S. Treasury bonds, she added.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.