The Rupiah Continues To Weaken, What Is The Fate Of Indonesia's Valas Debt?

Illustration (Photo: Doc. Antara)

JAKARTA - The government through the Ministry of Finance (Kemenkeu) stated that the impact of the weakening of the rupiah exchange rate that has occurred recently has the potential to put pressure on government debt in the form of foreign exchange (varlas).

The Director General of Financing and Risk Management (PPR) of the Ministry of Finance Luky Alfirman revealed, although rationally it must have an effect on propagation, the current excesses tend to be managed. This assumption is based on several things.

First, rupiah depreciation in the current year (year to date/ytd) in September is comparable to a macro value of IDR 300 in the 2022 State Budget.

"This means that the impact that arises on the interest of our debt is not too big," he said when answering questions from the media crew, quoted by the editor on Monday, October 24.

Second, the current weakening of the rupiah was followed by the government's strategy to reduce debt withdrawals for the 2022 period.

The financing needs are covered by the performance of the APBN which still posted a surplus supported by the windfall of commodities and the recovery of the national economy.

"We are also reducing the debt target so that it can reduce interest expense and that the impact is much greater than the increase in the foreign exchange debt burden," he said.

Third, the composition of foreign exchange debt has decreased drastically when compared to the previous government period.

"The current condition of foreign currency debt is better, if in the last 10 years the portion could be 41 percent today, only 29 percent. So it is much more maintained," he said.

Luky also ensured that the strategy to reduce debt withdrawals would still be pursued, especially before the close of the 2022 fiscal year.

"We will reduce the financing target until the end of the year with a decrease in cross financing of around 20 percent," he said.

Citing the latest data from the Ministry of Finance, it is known that until August 2022 the government's foreign exchange debt is worth IDR 1,229 trillion in the form of Government Securities (SBN).

In general, the position of government debt is at IDR 7,236.61 trillion with a debt-to-gross domestic product ratio of 38.30 percent (GDP).

Just so you know, in the 2022 State Budget report, the government has paid debt interest of IDR 186.1 trillion.

Of that figure, as much as Rp. 181.4 trillion was used to pay interest on domestic debt.

Meanwhile, the remaining Rp4.6 trillion is intended for foreign debt interest payments.

The total budget ceiling for the 2022 debt interest payment is IDR 405.9 trillion, with details of domestic debt interest of IDR 393.7 trillion and foreign sector of IDR 12.2 trillion.