Indef Economist: Risk Of Failing To Pay US Debt Has No Impact On Indonesia

Illustration. (Photo: Doc. Antara)

JAKARTA - Institute for Development of Economics and Finance (Indef) Economist Abdul Manap Pulungan believes that the impact of the risk of default on US debt will not have a significant impact on Indonesia.

"The impact of this potential default to pay off debt is temporary, it will not have a very far impact because of course those who are attacked from the financial sector," said Abdul Manap in an Indef discussion, quoted from Antara, Tuesday, May 8.

He explained that the impact of this potential needs to be reviewed from the conditions of Indonesia's dependence on the US.

From the trade sector, Abdul Manap said the potential impact would arise from US demand for import exports. Because, if it is difficult to pay debts, then there is a possibility that the US will reduce import export demand to Indonesia.

Even so, the contribution of US import exports to Indonesia was not very significant, at 9.22 percent for exports and 4.79 percent for imports. The percentage is still far from the contribution of import exports of ASEAN countries of 18.98 percent for exports and 17.31 percent for imports.

Then, in terms of Foreign Investment (PMA), Abdul Manap said that the US PMA portion in Indonesia was only 6 percent in 2022. However, continued Abdul Manap, the government still needs to be aware of the PMA aspect because the US invests in strategic sectors, especially energy.

The next sector that needs to be considered is the monetary sector. The effect of defaulting US debt on the Indonesian monetary sector will be seen in the transmission of the rupiah exchange rate. This is because monetary turmoil generally causes capital outflows which cause rupiah exchange rate depreciation so that it can affect interest rates.

The last sector is fiscal. According to Abdul Manap, the potential impact of default on US debt could affect the return of Government Securities (SBN). If the US fails to pay off the debt, the value of the SBN yield will increase, and the amount of costs incurred by the government for the SBN auction will increase.

"Of course this will affect installment fees and principal debt that tend to increase," explained Abdul Manap.