Indonesia plans to inject US$3.8b into state firms this year

[BANDUNG] Indonesia will inject 48 trillion rupiah (US$3.82 billion) this year into state-owned enterprises mainly in the infrastructure sector as the government's move to slash fuel subsidies will give it more fiscal flexibility, the president said on Monday.

The funds will be allocated to state companies such as port operator PT Pelabuhan Indonesia, construction firm PT Wijaya Karya Tbk, railway operator PT Kereta Api Indonesia and airport operator PT Angkasa Pura, Indonesian President Joko Widodo told reporters. "After we redirect the fuel subsidies, there's a lot of fiscal room in our budget," Widodo said. Once funds are injected into state enterprises, they will be able to leverage on their enhanced equity to get bigger bank loans, he added.

Indonesia's new administration, which took office in October, will also allow state-owned firms to use their profits for capital expenditure instead of sharing it with the government in the form of dividends.

Local media had previously reported the government's plan to direct more funds into state enterprises.

Since Jan 1, the government stopped subsidising gasoline prices altogether and moved to setting prices according to global oil markets.

Finance Minister Bambang Brodjonegoro said on Friday the state is budgeting 81 trillion rupiah for subsidies for other types of fuel this year, much lower than an initial budget of 276 trillion rupiah.

The finance ministry said on Friday the country had raised US$4 billion in a US dollar bond issue, taking advantage of the current low yield environment and improved sentiment toward Indonesia and Widodo's policies.

REUTERS