INDONESIA could write off up to $550 million of bad loans from small businesses in a bid to boost lending and growth in Southeast Asia’s biggest economy, according to a senior official.

The government plans to pass regulations this month allowing state-run lenders such as Bank Mandiri and Bank Rakyat Indonesia to write off up to Rp8.7 trillion (S$728 million) in loans in difficulty, declared late the Minister of Public Enterprises, Erick Thohir, in a press release. Monday (November 4). Policymakers are still discussing what types of loans could be forgiven, which would affect the final figure, he added.

Indonesia’s new government has made debt cancellation one of its immediate policy goals, as it seeks to drive gross domestic product growth to 8 percent, well above the 5 percent average. the last decade. Growth reached 4.95 percent in the third quarter, below economists’ estimates and its slowest pace in a year.

Yet millions of small businesses can’t get the loans they need to grow because existing regulations complicate the process for government lenders to cancel their troubled loans. Non-government lenders like Bank Central Asia do not have the same problem.

“This policy that allows state lenders to write off debt is something we have been waiting for,” Sunarso, president and director of Bank Rakyat, told reporters on October 30. “We did not dare to do it because some regulations may categorize this as state losses.” BLOOMBERG