Honest Reviews! Ministry Of Finance Admits SOE Guarantee Has The Potential To Depress Fiscal

JAKARTA - The Director General of Financing and Risk Management of the Ministry of Finance (Kemenkeu) Luky Alfirman said that the government's commitment to providing support on the funding side for SOEs in carrying out infrastructure development is considered to have its own risks.

“The ability of SOEs remains the main aspect of the government's consideration in assigning assignments, considering that some projects may not be financially visible. For this reason, government guarantees must use good governance and pay attention to the sustainability of fiscal capacity," he said in a virtual workshop broadcast on Tuesday, June 14.

According to Luky, the basis for providing guarantees for state-owned corporations is regulated in Presidential Regulation Number 82 of 2015 and the Minister of Finance Regulation (PMK) in the context of national economic recovery.

"Since 2008, the Ministry of Finance has issued 79 letters or government guarantee agreements for 256 programs with a value of not less than Rp.490,2 trillion," he said.

Meanwhile, the funds are used to build infrastructure projects that include the electricity, toll roads, transportation and drinking water sectors.

"The government ensures that there is awareness given to SOEs where the assignment is accompanied by fiscal support," he continued.

Furthermore, Sri Mulyani's subordinate also explained that this government guarantee can also be used to expand access to funding and reduce the cost of funds.

"The alternative in the form of government guarantees, apart from providing solutions, also creates potential pressure on state finances in the APBN if SOEs fail to pay or default," said Luky.

To overcome the risk of default, the Ministry of Finance requires corporations receiving guarantees to develop a measurable and prudent framework as a form of good governance.

"The government provides guarantees only to eligible SOEs in accordance with regulations, one of which gets an assignment from the sector ministry or coordinating ministry," concluded Luky.