Meeting With Jokowi, Sri Mulyani Brings Good News By Promising To Reduce Foreign Debt: SBN Retail Issuance Will Be Strengthened

JAKARTA - Minister of Finance (Menkeu) Sri Mulyani said that the government as far as possible avoids issuing State Securities (SBN) abroad for the upcoming 2022 period. The minister made the decision after meeting with President Joko Widodo (Jokowi) at the Merdeka Palace, Jakarta earlier this week.

According to the Minister of Finance, this step cannot be separated from the government's projection of the continuing uncertainty in foreign financial markets.

"We will continue to maintain financing carefully because next year there will be some global dynamics that we must be aware of," she said through a virtual channel, quoted Tuesday, November 30.

The Minister of Finance added that these indications can be seen from the fairly high increase in inflation in several European countries due to the impact of the energy crisis at the end of 2021.

"We will also be wary of commodity prices and from the economic side, both from the situation in China and the United States, where they may face pressure from this dynamic," she said.

However, the state treasurer did not rule out the possibility that the government would continue to issue SBN to foreign markets with a series of in-depth considerations.

"Therefore, the target and timing of the auction for SBN will be carried out carefully according to market dynamics," she asserted.

Instead, financing will be focused on the domestic segment whose risk management tends to be maintained. This is because the government has the ability to penetrate the domestic economic system through a number of strategic policies as well as incentives and stimulus.

"We will use the optimization of retail SBN issuance to strengthen retail investors in Indonesia and domestically," she said.

In addition, the Minister of Finance also revealed that the government will increase alternative financial resources that have a low impact.

"We will rely on non-debt financing sources such as cash balances from BLU (public service agency), SAL (excess budget balance) and Silpa (excess budget financing), and of course we will continue to coordinate with Bank Indonesia and related authorities," explained the Minister of Finance. .

Keeping the promise

In the previous VOI report, the government through the Ministry of Finance (Kemenkeu) said it would maintain prudent debt management through the composition of domestic SBN which is larger than debt in foreign currency. This was stated in the official broadcast of the October 2021 edition of our state budget (APBN), which was released by the Ministry of Finance.

"The government has consistently tried to reduce foreign loans and SBN in foreign currencies as an effort to reduce exposure to government debt," said the institution led by Sri Mulyani.

Just so you know, the debt position as of September 2021 has reached IDR 6.711.52 trillion. This amount is equivalent to 41.38 percent of gross domestic product (GDP).

It is said that the central government's debt position has increased by IDR 86.09 trillion when compared to the debt position at the end of September 2021.

“The increase in Indonesia's debt was mainly due to an increase in debt from domestic Government Securities by IDR 89.08 trillion, while Government Securities in foreign currencies increased by IDR 6.2 trillion. Then, for loans, there was a decrease of IDR 9.19 trillion," said the release of the Ministry of Finance.

Separately, Bank Indonesia (BI) reported that Indonesia's foreign exchange reserves decreased by USD 1.4 billion in the past month, from USD 146.9 billion in September 2021 to USD 145.5 billion in October 2021.

"The decline in the position of foreign exchange reserves in October 2021 was influenced, among other things, by the payment of the government's foreign debt," said Head of the BI Communications Department Erwin Haryono in a press statement earlier this month.

To note, the condition of Indonesia's debt is still quite qualified considering that the State Finance Law Number 17 of 2003 states that the maximum debt limit cannot exceed 60 percent of GDP.