Indonesian bank sale back on

Indonesia's budget is still trillions in the red

The sale of a controlling stake in one of Indonesia's top banks is back on as the government struggles to keep its huge budget deficit under control.

Most of Bank Niaga, in which the state holds a 97% shareholding, was meant to be sold off in June under an $5bn loan deal with the International Monetary Fund.

But in June the auction was ditched because both the offers from the final bidders - one consortium headed by Australia and New Zealand Banking Corp (ANZ) and Panin Bank and another led by Malaysia's Commerce Bank - were too low.

The Indonesia Bank Restructuring Agency (IBRA) now says it wants the sale of a 51% stake to be complete by late October.

IBRA is trying to raise 19.5 trillion rupiah ($2.1bn; £1.4bn) this year in asset sales, with another 4 trillion budgeted from other privatisations to help deal with an estimated budget deficit of 42 trillion rupiah, about 2.5% of gross domestic product.

A little at a time

IBRA took over the bank along with much of Indonesia's financial sector in the wake of the Asian currency crisis of the mid-1990s, which pushed the country's economy almost to collapse and triggered the downfall of the former dictator Suharto.

It has been testing the water by a policy of trickling up to 20% of its total holding onto the open market, halting sales whenever the price drops too low.

It has not specified what its floor for the sale might be, but Niaga Bank shares are trading at about 40 rupiah, half their level of about 80 rupiah when the sale was called off in June.

Neither consortium would go beyond 20-30 rupiah a share at that point, and some analysts believe the bank is in fact only worth about 15 rupiah a share.