Government Issues IDR 186 Trillion To Pay Debt Interest In Semester I, This Year's Allocation Is IDR 405 Trillion

JAKARTA - The State Budget Implementation Report for the First Semester of 2022 states that the government has paid interest on debt of Rp. 186.1 trillion or 45.8 percent of the ceiling of Presidential Decree No. 98 of 2022.

Of this amount, Rp. 181.4 trillion or 46.1 percent of the ceiling was used to pay interest on domestic debt. Meanwhile, the remaining Rp4.6 trillion or 38.1 percent of the ceiling is intended for foreign debt interest payments.

"Paying interest on debt is the government's obligation to investors or lenders as a consequence of using debt to cover the needs of the APBN deficit and other financing needs, such as state investment," said the minutes submitted by the government to the DPR as quoted by the editorial team on Monday, July 4.

The report states that interest payments on debt include interest payments on domestic and foreign debt, the calculation of which is based on government debt that has not yet matured and estimates of additional new debt.

Debt interest payments also include coupons and discounts on government securities, loan interest, and other costs incurred as a result of managing government debt.

"Payment of debt interest is strongly influenced by outstanding government debt, additional government debt, and volatility in financial markets, particularly exchange rates and interest rates," the government report said.

Furthermore, changes in the exchange rate will have an impact on changes in interest rates on debt denominated in foreign currencies, while changes in interest rates will affect SBN yields, thereby impacting the cost of procuring new debt and impacting the loan benchmark interest rate.

"In the first semester of 2022, the US economic recovery sentiment marked by rising inflation and United State Treasury (UST) yields as well as geopolitical conflicts between Russia and Ukraine resulted in an increase in SBN yields," the government said.

In accordance with Presidential Regulation Number 98 of 2022, it is noted that the ceiling for payment of domestic debt interest is Rp. 393.7 trillion. Then for the foreign debt interest budget of Rp. 12.2 trillion. Thus, the total budget budgeted by the government to pay debt interest this year has reached Rp405.9 trillion.

In the previous VOI report, the government's debt position until the end of May 2022 was IDR 7,002.24 trillion with a debt to GDP ratio (debt to GDP ratio) of 38.88 percent.

This amount is around IDR 50 trillion lower than the April 2022 record of IDR 7,052 trillion, equivalent to 40.39 percent of GDP.