One-Third Of the World's Countries Are Heavily Indebted, How is Indonesia's Condition?

Illustration (Photo: Doc. Antara)

JAKARTA – The global situation that is still filled with uncertainty is considered to have its own impact on a country's ability to manage finances. One thing that is now quite worrying is the soaring debt due to the trend of rising interest rates.

The reason is, with an inflated interest rate, certainly, the cost of funds will also increase.

This situation is illustrated by the statement of the Minister of Finance, Sri Mulyani, from the United States this week.

"The condition of many countries in the world is not in good condition", She said in a written statement quoted on Wednesday, October 12.

In fact, the Minister of Finance said that large debt bondage was lurking in several countries due to significant changes in the global economy.

“A third of the world's countries will experience economic pressures in the next 4-6 months, both due to difficulties due to high debt burdens, plus weak macroeconomic fundamentals and issues of political stability. This happens not only in developing countries but also in many developed countries", She said.

So what about Indonesia's debt?

Citing the latest data released by the Ministry of Finance, it is known that the government's debt until the end of August 2022 is IDR 7,236.6 trillion, or equivalent to 38.2 percent of gross domestic product (GDP).

This figure increased by around IDR 73.4 trillion from the position in July 2022 which was recorded at IDR 7,163.1 trillion or 37.9 percent of GDP.

"This increase occurred mainly due to the increased need for spending during the three-year relaxation period due to COVID-19", said the Ministry of Finance in its minutes quoted Wednesday, October 10.

The government itself claims that the amount of this obligation is still under control based on the reference to the State Finance Law Number 17 of 2003 and the State Budget Act. The pair of policies stipulate that the debt ratio is still safe if it is below the 60 percent limit to GDP.

"The challenges ahead will be more severe because the food and energy crisis is another stumbling block that needs to be watched out for after the pandemic passes, so that fiscal discipline, especially debt management, will continue to be maintained so that the economy continues to run", the Ministry of Finance report said.

Turning to Bank Indonesia (BI), the monetary authority stated that Indonesia's foreign debt (ULN) as of July 2022 was 400.4 billion US dollars. This book is down 3.2 billion US dollars from the June 2022 score which reached 403.6 billion US dollars.

BI revealed that the decline in external debt occurred due to reduced public external debt (government and Bank Indonesia) as well as the private sector.

"The government's external debt in July 2022 is 185.6 billion US dollars. and the private sector is 206.3 billion US dollars", said the Head of the Bank Indonesia Communications Department, Erwin Haryono, some time ago.

Although Indonesia's debt condition is well maintained, what needs to be paid attention to is that the government must bear the relatively higher interest burden.

VOI noted that Indonesia had paid debt interest of IDR 317.89 trillion throughout 2020. This value increased compared to the 2019 period of IDR 277.23 trillion.

As for this year, the ceiling for payment of debt interest is IDR 405.9 trillion based on Presidential Regulation No. 98 of 2022. In detail, the interest on domestic debt is IDR 393.7 trillion and foreign debt is IDR 12.2 trillion.

In its realization, until the first semester of 2022, IDR 186.1 trillion or 45.8 percent of the allocated allocation has been paid.

Just so you know, the government has budgeted the 2022 State Budget for IDR 3,106.4 trillion. This means that around 13 percent of this year's state spending is used to cover debt interest.