Jakarta. Indonesia’s settlement of Rp218.3 trillion ($12.15 billion) in crisis-era debt to Bank Indonesia has closed one financial chapter from the 1997–98 Asian financial crisis, but economists say the government still faces a long-running challenge to recover money owed by banks and borrowers that received state support.

Finance Minister Suahasil Nazara described the settlement as the closing of a chapter in Indonesia’s economic history and said the experience offered lessons for macroeconomic policymaking and crisis management.

The repayment of government obligations to the central bank should not be interpreted as the end of the Bank Indonesia Liquidity Assistance (BLBI) saga, economists said. Claims against BLBI obligors and debtors remain outstanding and must continue to be pursued.

“This has certainly provided extraordinary lessons for the Indonesian economy and for Indonesia’s macroeconomic policy, making it part of history that can now be closed,” he said.

Telisa Falianty of the University of Indonesia described the repayment as largely an administrative and symbolic milestone that closes a financial legacy of the 1997–98 crisis.

The obligations stemmed from recapitalization bonds issued by the government to rescue banks that collapsed during the crisis. Their settlement removes a long-standing government liability recorded as an asset on Bank Indonesia’s balance sheet, Falianty said.

“With a cleaner balance sheet, the fiscal and monetary relationship becomes clearer because Bank Indonesia no longer records a historical claim against the government,” she said.

Falianty said the repayment could provide some fiscal flexibility because the government will no longer have to make annual interest payments on the bonds, although she cautioned against overstating the impact.

According to the Finance Ministry, the final payment was funded from non-tax state revenue originating from Bank Indonesia’s remaining surplus, rather than tax revenue.

The settlement therefore does not directly reduce tax revenue available to the government, Falianty said. Its potential benefit lies in eliminating a recurring obligation from future budgets, allowing funds previously allocated to interest payments to be used for other priorities.

But Endrizal Ridwan of Andalas University offered a different assessment, saying the settlement itself has little macroeconomic impact because it essentially transfers assets between two state institutions.

“Ultimately, every government expenditure is paid by society through taxes or inflation,” Ridwan said, adding that the economic cost of the crisis response should be viewed in terms of development opportunities that may have been forgone.

At the same time, Ridwan said it was difficult to determine how Indonesia’s economy would have performed without the banking rescue. The costs may have slowed growth, but the intervention could also have prevented an even deeper economic contraction, he said.

The cost of the banking rescue and crisis management has been estimated at around Rp640 trillion, equivalent to about 70% of Indonesia’s gross domestic product at the time.

BLBI Claims Remain

Nailul Huda of the Center of Economic and Law Studies (Celios) said the government must make clear that the completion of its obligation to Bank Indonesia does not mean BLBI recipients have settled their debts.

“The obligation of BLBI obligors remains even though the government’s debt to Bank Indonesia has been paid,” Huda said.

The state has recovered Rp39.32 trillion in funds and assets from BLBI obligors, according to consolidated data following the end of the BLBI Task Force’s mandate in late 2024. The amount represents around 36% of the task force’s original recovery target of Rp110.45 trillion.

He said outstanding claims should continue to be pursued because funds owed by BLBI obligors could otherwise have been used for public spending, including health and education.

Following the end of the BLBI Task Force’s mandate, outstanding state claims are being handled through the State Receivables Affairs Committee (PUPN) under the Finance Ministry’s Directorate General of State Assets.

Lessons Learned

The economists also pointed to different lessons from the crisis for future policymaking.

Falianty said Indonesia had since strengthened its financial crisis framework, including through the 2016 Financial System Crisis Prevention and Management Law, which introduced a greater emphasis on “bail-in” mechanisms rather than relying on taxpayers to fund bank rescues.

She also cited the establishment of the Financial Services Authority (OJK) as a separate financial-sector supervisor and the role of the Financial System Stability Committee (KSSK) in monitoring systemic risks.

Ridwan, meanwhile, said the crisis demonstrated the risks of excessive government intervention and the need for the domestic economy to be more adaptable to external shocks.

The long-term lesson, he said, is that crisis management should minimize the burden placed on taxpayers while maintaining safeguards to prevent financial instability from spreading through the economy.

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