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Audit shows Bank Indonesia may need recapitalising JAKARTA: Indonesia's Supreme Audit Agency (BPK) said on Friday the country's central bank finances are in such a state it may have to be recapitalised.

It said its audit, released to parliament late on Friday, showed Bank Indonesia was likely to have negative equity.

"There is a possibility of Bank Indonesia having negative equity and that the government, in accordance with the law, needs to recapitalise Bank Indonesia with the approval of parliament," BPK chief Satrio Budiardjo Joedono told parliament.

The general audit was conducted into the central bank as of May 1999 when it officially became independent of the government.

The report blamed in part poor management at the central bank.

There was no immediate reaction to the report by the central bank.

However, Finance Minister Bambang Sudibuyo, who accompanied Joedono, said the International Monetary Fund had agreed to a government proposal to recapitalise the central bank, and this would happen soon if parliament gave its approval.

During the height of Indonesia's financial crisis in 1997 and 1998, Bank Indonesia extended trillions of rupiah in liquidity credits to troubled banks, most of which are now unable to repay them.

Local media reports have said there are fears the central bank may have to bear some of the costs, which could badly hurt its financial position unless the government, itself strapped for cash, steps in to help.

There have been some suggestions that the current central bank might simply be closed down and a new one set up. That option was taken in the Philippines following the end of the Marcos regime.

The BPK has issued a "no opinion" disclaimer with its audit, saying it did not have enough information to come to definitive conclusions about the state of the central bank's finances.

"There is weak internal supervision which would have a material impact. This has made the scope of the audit inadequate and has led the auditors to give a 'no opinion'," Joedono added.

The report noted, for example, that it could not find certificates of ownership for central bank gold deposited overseas.

"BPK acknowledges that its conclusions are very extraordinary and unusual, at least among central banks. Therefore, the conclusions had been checked and rechecked with BPK's consultant KPMG," he said.

Sudibyo told parliament the government had consulted the IMF about recapitalising the central bank and that corrective action must be taken soon to boost confidence in Bank Indonesia.

"With approval from parliament, Bank Indonesia will soon be recapitalised by the government. This (proposal) has been discussed with the IMF and it has agreed to it," Sudibyo said.

"Bank Indonesia has to soon conduct comprehensive corrective actions regarding its personnel, organisation, internal supervision, system and supervision of (commercial) banks," Sudibyo added.

The IMF is leading a more than $45 billion international rescue package for Indonesia. It is due to sign its latest letter of intent with Jakarta in January.-Reuters