The Risk Of Guarantee Defaults Makes It Horrifying, Sri Mulyani's Subordinates Want SOEs To Do This

JAKARTA – The Director-General of Financing and Risk Management of the Ministry of Finance, Luky Alfirman, continues to encourage all State-Owned Enterprises (BUMN) that are recipients of guarantees to always apply the principles of good governance in their activities.

According to Luky, this is important considering that the budget allocation for the guarantee comes from the State Budget (APBN) which is sourced from the support of all Indonesians.

"The government ensures that there is awareness given to SOEs where the assignment is accompanied by fiscal support", he said online at a workshop entitled Implementation of State Financial Risk Management for Guaranteeing SOEs in the Framework of Accelerating Infrastructure Development, Tuesday, June 14.

Luky added that fiscal involvement in this scheme must be managed as much as possible so as not to cause losses to state finances.

"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", he said.

Therefore, Sri Mulyani's subordinates hope that the corporations that receive the facility can develop a measurable and careful framework.

"Risk management begins when SOEs apply for guarantees and we see how the maximum limit for guarantees is and the assessment process for the ability to pay", he said.

Furthermore, Luky explained that SOEs must also submit risk mitigation plans for financing facilities that will be guaranteed by the government. In addition, when the guarantee is issued, the Ministry of Finance and the Ministry of SOEs will immediately oversee the implementation process in the field.

"Risk management is carried out continuously after the guarantee is issued through joint monitoring obligations and also the renewal of the mitigation plan as well as a continuous work commitment until the end of the period", he said.

For information, since 2008 the Ministry of Finance has issued 79 letters or government guarantee agreements for 256 programs with a value of not less than IDR 490,2 trillion.

"The government allocates guarantee obligations in the APBN in the form of a reserve fund or an allowance for guarantee funds as a risk mitigation for government guarantee constraints and we report all of that to the House of Representatives (DPR) and audited by the Audit Board of Indonesia (BPK)", concluded Luky.