Norman Harsono – Indonesia may cancel as much as $550 million of small businesses' bad debt in a bid to boost lending and growth in Southeast Asia's largest economy, according to a top official.
The government aims to pass a regulation this month letting state-owned lenders such as PT Bank Mandiri and PT Bank Rakyat Indonesia forgive as much as 8.7 trillion rupiah of troubled loans, State-Owned Enterprises Minister Erick Thohir said in a statement late Monday. Policymakers are still discussing what types of loans could be forgiven, which would affect the final figure, he added.
Indonesia's new government has set the debt cancellation plan as one of its immediate policy goals as it seeks to drive gross domestic product growth to 8%, far higher than the average 5% over the last decade. Growth clocked in at 4.95% in the third-quarter, below economist estimates and its slowest pace in a year.
Yet millions of small businesses can't get the loans needed to grow their enterprise because existing regulations complicate the process for state lenders to forgive their troubled borrowings. Non-government lenders like PT Bank Central Asia don't have the same problem.
"This policy that lets state lenders cancel debt is something that we've been waiting for," Bank Rakyat President Director Sunarso told reporters on Oct. 30. "We haven't dared to do it because some regulations may categorize that as state losses."