Aghnia Maurizka Prameswari

Basically, Foreign Loans are financing scheme through debt obtained by the Government from Foreign Lenders that are bound by loan agreement and not in the form of government securities, which must be repaid with certain requirements. There are two types of Foreign Loans, namely Cash Foreign Loan and Activity Foreign Loan. In this article, we will discuss further regarding Cash Foreign Loan.

Cash Foreign Loan is regulated in the Regulation of the Minister of Finance Number 117/PMK.08/2022 of 2022 concerning Procedures for Procurement of Cash Foreign Loan (PMK 117/PMK.08/2022) and Government Regulation of the Republic of Indonesia Number 10 of 2011 concerning Procedures for Procurement of Foreign Loan and Receipt of Grants (PP 10/2011). As stated in Article 1 number 2 of PMK 117/PMK.08/2022 Cash Foreign Loan hereinafter referred to Cash Loan is a foreign loan in the form of foreign exchange and/or rupiah which used for financing the APBN (State Revenue and Expenditure Budget) deficit and manage the debt portfolio.

Foreign loan must meet the following principles:

1.      transparent;

2.      accountable;

3.      efficient and effective;

4.      prudent;

5.      not accompanied by political ties; and

6.      do not have any content that can disrupt the stability of state security.

Procurement of Cash Loan aims to:

1.      meet the APBN financing needs through debt; and

2.      manage the debt portfolio.

Types and Sources of Cash Loan

Cash loan can take various forms, including program loan, standby loan, short-term liquidity financing, contingency financing, and capital financing. These loans are disbursed in cash and may in the form of Official Development Assistance (ODA) from bilateral sources, concessional loan from multilateral institutions, non-ODA bilateral loan, non-concessional multilateral loan, commercial loan, and mixed credit or mixed loan from bilateral sources.

Cash Loan according to their types consist of:

a.       Program Loan

Program Loan is a type of Cash Loan that can be withdrawn only after fulfilling specific conditions agreed upon by both the Government and the lender. These conditions may include policy matrices, the implementation of certain activities, or reimbursement for previously funded activities.

b.      Standby Loan

Standby Loan is a Cash Loan that is prepared and ready to be withdrawn when needed by the Government, based on an agreement between the Government and the lender.

c.       Commercial Cash Loans

Commercial Cash Loan is Cash Loan sourced from foreign financial institution, national financial institution, and foreign non-financial institution domiciled and conducting business activities outside the territory of the Republic of Indonesia with the requirements applicable in the international financial market.

Cash Loan can come from:

a.       Multilateral Creditor

Multilateral Creditor is an international financial institution with members from several countries, which provide loan to the Government.

b.      Bilateral Creditor

Bilateral Creditor is a foreign government or institution appointed by foreign government or institution acting for foreign government that provide loan to the Government.

c.       KSA

Foreign Private Creditor, hereinafter abbreviated as KSA, is a foreign financial institution, national financial institution, and foreign non-financial institution domiciled and conducting business activities outside the territory of the Republic of Indonesia that provide loan to the Government based on unsecured loan agreement from export credit guarantee institution.

The Minister of Finance submit Cash Loan proposal to prospective foreign lenders while considering the maximum limit plan for foreign loan to secure financing commitment. If the lenders require specific policy conditions for the loan, these conditions must first be approved by the relevant ministries or institutions. The fulfilment of these requirements is coordinated by the Coordinating Minister responsible for the loan’s substance, in collaboration with the Minister of Finance and the Minister of National Development Planning/Head of the National Development Planning Agency.

Source:

-          Government Regulation of the Republic of Indonesia Number 10 of 2011 on Procedures for Procurement of Foreign Loan and Grant Receipt

-          Minister of Finance Regulation Number 117/PMK.08/2022 of 2022 on Procedures for Procurement of Cash Foreign Loan