JAKARTA, Nov 8 (Reuters): Indonesia's government has announced that it would offer sovereign guarantees for loans on businesses and projects that can boost economic recovery, as it steps up efforts to bolster an economy battered by the Covid-19 (coronavirus) pandemic.
Despite having ample liquidity in the banking sector, the government has been struggling to spur loan growth due to a lack of appetite to expand businesses, while lenders are also keen to hedge risks amid uncertainty during the pandemic.
Under a new regulation released on Friday (Nov 6), the government will provide a guarantee against default risks for loans, debt securities and other risks for financial institutions that will provide loans for state and municipality-owned companies, regional governments, as well as private companies.
The government will cover both the principal and interest of the loan made by non-private companies at the time of default.
For private firms, however, the government's coverage would depend on the their financial conditions and ability to pay.
Criteria for eligibility for the guarantee will be issued later, but the regulation said all projects are required to support economic recovery or be part of the National Economic Recovery Programme (PEN), Indonesia's pandemic relief budget.
Indonesia has set aside 695.2 trillion rupiah (US$48.38 billion) for the PEN, which include health-related spending and social protection programmes. So far, the government has spent just over half, or 366.86 trillion rupiah, according to data from a presentation by the chief economics minister Airlangga Hartarto.
The country suffered its first recession in over two decades as its gross domestic product shrank by 3.49% year-on-year in the third quarter due to the pandemic.
Meanwhile, the Covid-19 cases in Indonesia rose by 3,880 within one day to 437,716, with the death toll adding by 74 to 14,614, the Health Ministry said on Sunday (Nov 8).
According to the ministry, 3,881 more people were discharged from hospitals, bringing the total number of recovered patients to 368,298.
The virus has spread to all the country's 34 provinces.
Within the past 24 hours, Jakarta recorded 826 new cases, Central Java 640, West Java 479, East Java 282 and East Kalimantan 201. E- Reuters
Despite having ample liquidity in the banking sector, the government has been struggling to spur loan growth due to a lack of appetite to expand businesses, while lenders are also keen to hedge risks amid uncertainty during the pandemic.
Under a new regulation released on Friday (Nov 6), the government will provide a guarantee against default risks for loans, debt securities and other risks for financial institutions that will provide loans for state and municipality-owned companies, regional governments, as well as private companies.
The government will cover both the principal and interest of the loan made by non-private companies at the time of default.
For private firms, however, the government's coverage would depend on the their financial conditions and ability to pay.
Criteria for eligibility for the guarantee will be issued later, but the regulation said all projects are required to support economic recovery or be part of the National Economic Recovery Programme (PEN), Indonesia's pandemic relief budget.
Indonesia has set aside 695.2 trillion rupiah (US$48.38 billion) for the PEN, which include health-related spending and social protection programmes. So far, the government has spent just over half, or 366.86 trillion rupiah, according to data from a presentation by the chief economics minister Airlangga Hartarto.
The country suffered its first recession in over two decades as its gross domestic product shrank by 3.49% year-on-year in the third quarter due to the pandemic.
Meanwhile, the Covid-19 cases in Indonesia rose by 3,880 within one day to 437,716, with the death toll adding by 74 to 14,614, the Health Ministry said on Sunday (Nov 8).
According to the ministry, 3,881 more people were discharged from hospitals, bringing the total number of recovered patients to 368,298.
The virus has spread to all the country's 34 provinces.
Within the past 24 hours, Jakarta recorded 826 new cases, Central Java 640, West Java 479, East Java 282 and East Kalimantan 201. E- Reuters
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