Sri Lanka's Economic Crisis Should Be A Lesson For Indonesia

Illustration. (Photo: Antara Doc)

JAKARTA - An economic observer from the University of Indonesia, Telisa Aulia Falianty, said that the crisis that ensnared Sri Lanka should be a lesson for other countries, including Indonesia.

"Failure to pay Sri Lanka's debt must be a lesson for other countries, including Indonesia," said Telisa as quoted from ANTARA, Wednesday, July 13.

According to Telisa, one of the consequences of the crisis in Sri Lanka is that it can trigger the flight of foreign capital from developing countries, including the debt market in Indonesia.

"Although the trade relationship between Indonesia and Sri Lanka is relatively small, the perception of investors and creditors will be that developing countries/lower middle income countries have a high risk," he said.

Telisa said, Indonesia can prevent similar incidents by strengthening the resilience of domestic conditions through various means.

First, do not rely too much on one or two commodity sectors and must continue to diversify the economy, especially to sectors that have added value, such as manufacturing which can be a cushion in the event of an external shock.

Second, he continued, not to rely too much on imported products, especially in the food and energy sectors, and to increase domestic production.

Telisa also confirmed that many factors caused a country to go bankrupt, such as the economic and political crisis triggered by the COVID-19 pandemic, Russia's war in Ukraine, in addition to the inability to pay debts (default).

He also hopes that the government can manage foreign debt carefully and carry out good governance in terms of subsidizing policies so as not to burden the state budget.

Then, the government needs to stop infrastructure projects that are not in line with reducing logistics costs, smooth distribution of goods or industrialization and needs to be careful in accepting debt financing.

"The government also needs to save on personnel expenditures and budget expenditures so that they focus more on stimulating the small and medium business sector as well as digitizing licensing and controlling inflation so that they do not suffer the same fate as Sri Lanka," Telisa added.