Faisal Basri Reveals The Difference Between Indonesia's And Singapore's Debts Even If It's Bigger: They Pay 1 Percent Interest, Us 20 Percent

Illustration (Photo: Doc. Antara)

JAKARTA - Senior economist Faisal Basri acknowledged that Indonesia's debt ratio of gross domestic product or GDP (gross domestic product/GDP) is lower than neighboring Singapore.

According to the records, Indonesia's debt is 40 percent of GDP and Singapore's debt is 100 percent of its GDP. However, Faisal said there is one key thing that the government has rarely published.

"Singapore even though its debt burden is 100 percent of GDP, but the interest burden is only 1 percent of state revenue, while Indonesia has 20 percent (of state revenue) for next year," he said through a virtual channel quoted Monday, December 27.

According to Faisal, the obligation to pay interest on debt which reaches one-fifth of the state revenue sector makes the fiscal space narrower.

"That means (to pay debts) the salaries of civil servants must be reduced, for social activities they must be reduced. Why? Because if we don't pay this interest, we will default (the country is considered bankrupt). So that's our debt burden that can be reflected from here," he said.

Furthermore, the University of Indonesia academic saw the high interest trap caused by Indonesia's strategy in issuing securities with high interest rates. Different things will be encountered when compared to the neighboring countries in ASEAN.

"We get loans with an average interest rate of 6 percent. If Singapore 0.1 percent. This happens because Indonesia's risk is considered greater than Singapore's, such as political risk, then exchange rate risk, and so on," he explained.

Then, is Faisal Basri's statement true about Indonesia paying 20 percent of state revenue to pay its debts?

In the previous VOI report, the Working Meeting of the DPR RI Budget Board (Banggar) with the government at the beginning of last September revealed that Indonesia had paid debt interest of Rp. 317.89 trillion throughout 2020 on loans that reached Rp. 6,080.08 trillion.

Meanwhile, the total state revenue in 2020 is Rp.1,633.6 trillion. This means that last year the government had to fulfill its debt interest payment obligations of 19.46 percent of the total income received. This means that the economic assumptions made by Faisal Basri are confirmed.

Just so you know, so far the government has always encouraged opinions if the state debt condition is maintained. This is based on the constitutional mandate which states that the amount of debt cannot exceed the level of 60 percent of GDP.

Until the end of October 2021, the total government debt is known to be Rp. 6,687.28 trillion, equivalent to 39.69 percent.

“The government always says that our debt is only 40 percent of GDP. That's true because the law allows up to 60 percent. But the government should not lure by using certain data. Educate the community well so they can see the whole thing," concluded Faisal Basri.