Indonesia will expand tax incentives it currently gives to some manufacturing industries to cover 11 more sectors to prevent “massive bankruptcy” due to the impact of the coronavirus pandemic, officials said on Friday, Reuters reported. Governments around the world have provided stimulus measures to alleviate the threat to their economies from the widespread travel curbs and shutdowns of schools and businesses that have been triggered by the rapid spread of the novel coronavirus.
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The Indonesia Deposit Insurance Corporation (LPS) denied on Thursday media reports that its stress test had shown eight banks at risk of collapse under the government’s worst-case scenario for the economic impact of the coronavirus outbreak, Reuters reported. LPS Chairman Halim Alamsyah told an online briefing there were no indications any Indonesian bank would fail. “All banking indicators are normal and their fundamentals sound,” said Alamsyah, a former member of the Indonesian central bank’s board of governors.
The coronavirus crisis is creating a new threat for Indonesia’s debt-laden state-owned businesses, Bloomberg News reported. Many had binged on debt for years, faced accusations of mismanagement and even corruption, and were running into repayment problems before the virus struck. Now a slump in revenues and a credit crunch triggered by the dollar’s surge mean those risks will get a whole lot worse. “Covid-19 is exacerbating some of the challenges of the state-owned sector,” said Xavier Jean, an analyst at S&P Global Ratings in Singapore.
The coronavirus outbreak couldn’t have come at a worse time for PT Garuda Indonesia, pummeling demand at the flag carrier just as it faces a debt bill for half a billion dollars, Bloomberg News reported. Debt market concern about sagging travel demand and the impact of financial market turmoil has caused Garuda’s $500 million notes due on June 3 to tumble to a record low of 55.3 cents on the dollar, according to Bloomberg-compiled prices. The securities have dropped 5.9 cents this week after sinking 36 cents last week.
State-owned steelmaker Krakatau Steel has received approval from its creditors to restructure its loans totaling US$2 billion (Rp 27 trillion) by, among other changes, rescheduling repayment to 2027 in order to be able to revive its business, The Jakarta Post reported. Krakatau Steel president director Silmy Karim said in Jakarta on Tuesday that the debt restructuring would cut interest payments to $466 million from $847 million and cut costs by around $685 until 2027.
Indonesian authorities are weighing the induction of a strategic investor into a unit of the nation’s oldest insurer that’s on the brink of collapse after alleged fund mismanagement left a $2 billion hole in its books, Bloomberg News reported. PT Asuransi Jiwasraya has submitted a restructuring proposal to the Financial Services Authority that includes the stake sale in unit PT Jiwasraya Putra and securing financial assistance from a planned holding company for state insurers, according to Riswinandi, commissioner for non-banking financial industry at the authority, known as OJK.
Indonesia has more reason than most to be wary of backsliding on its commitment to budget discipline, Bloomberg News reported. Its deficit ceiling is an important piece of the economic and political architecture that emerged from the Asian financial crisis of the late 1990s. Indonesia experienced more than just a run on the currency, a deep recession and a rescue by the International Monetary Fund. The crunch morphed into riots, communal violence and the overthrow of dictator Suharto, who had ruled with military backing for more than three decades.
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The global collapse in coal prices this year has dealt a particularly heavy blow to miners in Indonesia, the top exporter and one of the largest producers of the fuel. Bonds from the country’s financially weak miners have suffered more than peers elsewhere in Asia due to a lack of diversification and state backing that many competitors enjoy, Bloomberg News reported. Prices of thermal coal -- the kind burned by power plants -- have slumped about 33% this year, and at least four U.S. firms have gone bankrupt.
Investors on a call in July with distressed Indonesia textile firm PT Delta Merlin Dunia Tekstil were confounded -- how could the company’s fortunes have turned so fast? They’re still searching for answers, in a case that’s revived concerns about a lack of transparency in corners of Asia’s credit markets, Bloomberg News reported. The saga has also highlighted risks of more scares ahead as the trade war and mounting geopolitical concerns reverse a rally in junk debt.
Questions have emerged over whether one of Indonesia’s wealthiest families has in effect dragged itself into court to prevent a foreign creditor from recovering a loan — a case experts say threatens the credibility of the country’s bankruptcy laws, the Financial Times reported. The case against a subsidiary of Lippo group, which is controlled by Indonesia’s Riady family, comes at a time when defaults are rising in the country. It is expected to spark concerns over powerful local conglomerates forcing out foreign creditors through bankruptcy proceedings.