Faisal Basri Warns Of Potential Debt Piles To Plunge Indonesia Into A Middle Class Country

Senior Economist Faisal Basri (Photo: Doc. Antara)

JAKARTA - Senior Economist Faisal Basri said the pile of government debt that is now mounting, especially in the two years of the pandemic, is very likely to bring Indonesia into a middle-income trap situation.

According to him, if this condition is not immediately found a comprehensive solution, then the dream of becoming a developed country will be difficult to achieve.

"What we need is a complete transformation, otherwise Indonesia will be caught in the trap of middle-income countries," he said in a written statement as quoted on Friday, August 20.

To note, Bank Indonesia reported that Indonesia's external debt (ULN) at the end of the second quarter of 2021 was US$415.1 billion or equivalent to Rp5,975.2 trillion (exchange rate of Rp14,387).

This figure consists of government external debt of 205.0 billion US dollars and private external debt of 207.2 billion US dollars.

This amount has not yet been added to the value of domestic government debt which is distributed through various financing instruments.

In fact, in the Financial Note of the 2022 RAPBN read by President Joko Widodo (Jokowi) on August 16, the value of the government's obligations at the end of next year will reach IDR 8,110 trillion or 45.3 percent of gross domestic product (GDP).

For information, the rules related to state debt are regulated in Law No.1/2003 on State Finance which mandates the ratio of government debt to a maximum of 60 percent of GDP. But remember, if next year's government debt is added to SOE debt, the ratio will approach 60 percent.

Unfortunately, the regulations in force in this country state that BUMN are business entities in the private category, which means that the calculation of debt cases is not included in the government's part of the obligation. In fact, it is almost certain that all state-owned companies are controlled and controlled by the government.

Meanwhile, in the 2022 State Budget Bill that President Joko Widodo submitted to the DPR earlier this week, he explained the outlook for state revenues of IDR 1,840.7 trillion.

Meanwhile, the expenditure sector is estimated to spend a budget of no less than IDR 2,708.7 trillion. So it can be concluded that the 2022 APBN deficit will be IDR 868 trillion or 4.85 percent of (gross domestic product (GDP).

The government itself next year plans to finance debt in the amount of IDR 973 trillion throughout 2022. Later, most of the funds will be used to cover the 2022 APBN deficit which is projected to reach IDR 868 trillion.