Keeping Fiscal Deficit, The Government Can Have 2 Ways To Pay Debt Falling Tempo

Rupiah (Photo: Antara)

JAKARTA - The Ministry of Finance (Kemenkeu) reported that debt maturity as of April 30, 2024 for the period 2025 to 2029 reached IDR 3,748 trillion. As for the details in 2025 of IDR 800.33 trillion, in 2026 it was IDR 803.19 trillion, while in 2027 it was IDR 802.61, in 2028 it was IDR 719.81 trillion and in 2029 it was IDR 622.3 trillion.

Meanwhile, the position of government debt until April 2024 was IDR 8,338.43 trillion. Meanwhile, in nominal terms, the government's debt position increased by IDR 76.33 trillion, an increase of around 0.92 percent when compared to the debt position at the end of March 2024 which amounted to IDR 8,262.1 trillion.

Meanwhile, the ratio of government debt is equivalent to 36.5 percent of Indonesia's gross Domestic Product (GDP).

Meanwhile, this value is still below the safe limit of 60 percent of GDP according to Law Number 17/2003 concerning State Finance. In fact, it is still better than being established through the Medium-Term Debt Management Strategy for 2024-2027 at the level of 40 percent.

Meanwhile, based on instruments, government debt consists of two types, namely state securities (SBN) and loans. The majority of government debt in April 2024 is still dominated by SBN instruments, namely 32.1 percent and the remaining 4.4 percent of loans.

Furthermore, if it is detailed, the amount of government debt in the form of SBN reaches Rp7,333 trillion. The value comes from domestic SBN of Rp5,899 trillion, namely from Government Securities of around Rp4,714 trillion and State Sharia Securities (SBSN) reaching Rp1,185 trillion. Meanwhile, the amount of government debt in the form of loans is Rp1,005 trillion.

Head of Bank Permata economist, Josua Pardede, said that related to debts that are due in general, the government has 2 options for making payments.

According to Josua, the first way is that the government can carry out a debt switch, namely the repurchase of Government Securities whose transaction settlements are carried out by handing over other series of Government Securities.

Meanwhile, if there is a difference in the value of the settlement of the transaction, the government can make a cash payment of the State Debt.

"The second alternative considers maturing debt, especially in the context of handling the pandemic, will reach its peak in 2026," he explained to VOI, Friday, June 7.

According to Josua, the government also needs to consider government spending which is on a low priority scale to delay financing so that it will be able to support the maintenance of fiscal deficits at a healthy level which also has an impact on the cost of borrowing of competitive governments.

Josua Pardede estimates the position of foreign exchange reserves will be 140 billion US dollars-142 billion by the end of 2024 or a decrease compared to the end of 2023 which amounted to 146.4 billion US dollars.

Even so, Josua said that this year's foreign exchange reserves will still have the opportunity to fall, due to the risk of a higher policy interest rate for the longer.

"We are still anticipating the risk of higher policy interest rates for the longer and, as a result, we see the potential decline in foreign exchange reserves in 2024," he explained.

Josua said that risks related to global uncertainty will remain a major concern during the first semester of 2024, especially related to risk-off sentiment amid a higher for-longer policy interest rate.

According to Josua, this can limit the flow of foreign funds into Indonesia to a certain extent. In addition, the decline in the trade surplus due to the normalization of commodity prices and the weakening of global demand, coupled with Indonesia's strong domestic demand, will pose a risk of widening the current account deficit.

In addition, Josua explained that seasonal factors such as coupon payments and dividends to non-residents, which usually peak in the second quarter, also contribute to widening the current account deficit.