Indonesia's Debt Reaches IDR 8,041 Trillion, Celios Economist: Not Collaborating With Economic Growth

JAKARTA - The Ministry of Finance (Kemenkeu) reported that the position of government debt until November 30, 2023 reached IDR 8,041.01 trillion.

Related to this, Economist and Director of the Center of Economics and Law Studies (Celios) Bhima Yudhistira said that this number needs to be watched out for.

This is because the current debt burden is said to be increasingly uncorrelated with economic growth.

"(The government's debt condition of IDR 8,041.01 trillion) needs to be watched out for, especially foreign debt to the government's debt burden and SOEs is increasingly not correlated with economic growth," Bhima told VOI, Tuesday, December 19.

Bhima said the increase in the interest expense of government foreign debt which reached 36.4 percent year on year (yoy), was not proportional to economic growth which was only in the range of 5 percent.

He also worries that it can create crowding out effects that pressure the private sector and banks because liquidity is reduced.

"With a fairly high debt interest in the market, many investors finally chose to park funds in government foreign exchange debt securities rather than investment in the productive sector," he said.

According to Bhima, another debt risk indicator is debt payability.

It is known, the proportion of debt and interest payments or debt service ratio (DSR) Tier 2 in 2014 was at 33.3 percent.

Meanwhile, in October 2023 it jumped to 38.6 percent.

"This means that the increase in foreign debt has not been balanced by the ability to generate foreign currency, especially in terms of exports. This is not healthy in the long term," he said.

Bhima assessed that there were three main causes of swelling Indonesia's debt in November 2023.

"The main cause is the desire to build infrastructure that is not necessarily beneficial for economic competitiveness, wasteful bureaucratic spending, so that the level of corruption is still high, so spending becomes less effective," he added.

The government debt in the nine years of President Joko Widodo (Jokowi) administration during 2014-2023 has increased by IDR 5,432.21 trillion.

The addition was greater than the previous government, including the era of President Susilo Bambang Yudhoyono (SBY).

In SBY's leadership from 2004-2014, there was an increase in government debt of Rp1,309 trillion.

At that time, government debt in 2004 was still IDR 1,299.5 trillion, then IDR 2,608.78 trillion in 2014.

Along with the change of president, government debt has soared again. Currently, Indonesia's debt has exceeded the figure of IDR 8,041.01 trillion.