JAKARTA - All money is a matter of belief.
This sentence is a popular quote that was spoken by Adam Smith, a philosopher who is known as the father of modern economics.
In his view, money matters are closely related to a person's level of trust. Whatever it is, including debt.
In a simple context, trust in obtaining a loan is the fruit of a creditor's confidence in a debtor who is considered to be able to fulfill good faith in fulfilling obligations.
In a more complex situation, the first party may submit a debt to the second party, the proceeds of which are used for the third party. A scheme like this is also promoted by a country in issuing debt securities, aka bonds, with the aim of funding various government needs.
It is certain that almost all countries in the world that implement an international cooperation system must have debts. Indonesia is among them.
Based on a report released by Bank Indonesia on Monday, February 15, it was stated that the amount of Indonesia's foreign debt until the close of 2020 was US $ 417.5 billion or equivalent to IDR 5,985.9 trillion (exchange rate of IDR 14,337).
Of this amount, the public sector (government and central bank) contributed US $ 209.2 billion and the private sector (including BUMN) US $ 208.3 billion.
External debt, which is approaching the psychological level of Rp. 6,000 trillion, is a record for the largest loan ever made during the republic's existence.
However, the government through the Ministry of Finance explained that the situation was still quite under control. On one occasion, Finance Minister Sri Mulyani said that Indonesia's central government debt ratio was maintained at around 30 percent of gross domestic product (GDP).
According to the prevailing regulations, the range of state debt is still in a safe condition if it does not exceed the 60 percent limit of GDP. This mandate is stated in Law Number 17 of 2003 which regulates the maximum debt ratio limit of 60 percent.
The Central Statistics Agency (BPS) noted that the Indonesian economy in 2020 as measured by GDP at current prices reached IDR 15,434.2 trillion and GDP per capita reached IDR 56.9 million or 3,911.7 US dollars.
Then, what about other countries?
Believe it or not, developed countries that are always identified with rich countries like the United States and France are even known to have debt ratios exceeding 100 percent of their GDP. Meanwhile, Germany, China and India reached above 60 percent.
So, the nominal debt is not only a reference for increasing risk. As long as the domestic production capacity increases, the gap in nominal debt to GDP ratio will also balloon.
In principle, the debt security limit refers to two things. First is the ratio to gross domestic product. Second is the ability to pay, which is reflected in the foreign exchange reserves which Bank Indonesia reports regularly.
So, Sri Mulyani's optimistic attitude in maintaining state finances with good debt control is as if another manifestation of the idiom all money is a matter of belief.
The English, Chinese, Japanese, Arabic, and French versions are automatically generated by the AI. So there may still be inaccuracies in translating, please always see Indonesian as our main language. (system supported by DigitalSiber.id)
