How could central bank finance such a debt without igniting the inflation? Especially in a country with already expensive money and pretty large interest rates.
Central banks can print money. And most countries, even developing ones, can support more money printing than people understand. I am not advocating for crazy money printing, but printing 5-10% of GDP for a single year to clean-up a big financial mess isn't so bad.
Did you know that Indonesia has an explicit monetary policy to monetize a certain portion of their national debt each year? The finance minister (Sri Mulyani) is well respected, so foreign bond buyers were not upset by it. It did not "ignite" inflation. Also, look at quantitative easing by US, UK, EU, and Japan.
Quantitative easing in US, UK, EU, and Japan happened during the economy balancing on the brink of deflation. I.e. when capital from the developing world was actively escaping into the developed world, when the developed economies were bathing in cheap capital and firms could borrow at zero or even negative percent, and the economy grew massively and required quantitative easing for simply avoid inflation.
We can see how money printing works when the economy isn't growing respectively, the inflation hits as it happened in EU, US and Japan now.
> Did you know that Indonesia has an explicit monetary policy to monetize a certain portion of their national debt each year?
No, I don't. The only sources I found tell the opposite.
Central banks can print money. And most countries, even developing ones, can support more money printing than people understand. I am not advocating for crazy money printing, but printing 5-10% of GDP for a single year to clean-up a big financial mess isn't so bad.
Did you know that Indonesia has an explicit monetary policy to monetize a certain portion of their national debt each year? The finance minister (Sri Mulyani) is well respected, so foreign bond buyers were not upset by it. It did not "ignite" inflation. Also, look at quantitative easing by US, UK, EU, and Japan.