Government Debt Tends to Be Counterproductive, Indef Says

Enny Sri Hartati, Executive Director of the Institute for Development of Economics and Finance (Indef).

Jakarta, MINA – The government`s debt which continued to increase since 2015 is showing counterproductive tendency, the Institute for Development of Economics and Finance (Indef) said.

“The debt that has been increasing over the last three years tends to be counterproductive. The real sectors that should be getting better are worsening,” Antara News quoted Indef Executive Director Enny Sri Hartati as telling a press conference at Indef`s Jakarta office on Wednesday.

She noted that there is still an anomaly or deviation from the hope of the government to accelerate national productivity and competitiveness, including increasing self-efficiency as a nation.

“Import dependence has even begun to increase to the staple food sector,” said Hartati.

On the same occasion, Indef researcher, Riza Annisa Pujarama, said that government debt increased since 2015. Government debt is claimed to be used to finance infrastructure development.

Government debt jumped from Rp3,165.13 trillion (2015) to Rp3,466.96 trillion (2017). At the end of February 2018, central government debt amounted to Rp4,034.8 trillion.

“Government debt increases in line with spending. Structurally, the central government spending has not changed much in capital expenditures. What is increasing increases is spending personnel, goods expenditure and debt service payments,” she said.

Supported by SBN issuance

Pujarama also highlighted the central government expenditure that is still supported by the issuance of Government Securities (SBN) with a high percentage of foreign ownership. This needs to be wary of being able to generate capital outflow (capital outflow).

“SBN ownership is owned by many foreigners, this is a danger especially when the rupiah is depreciating,” she said.

Based on the Ministry of Finance records, until the end of February 2018, most of the government debt is still dominated by SBN issuance, reaching Rp3,257.26 trillion or 80.73 percent of total government debt.

SBN issuance of around Rp2,359.47 trillion or 62.62 percent issued in rupiah denomination and Rp897.78 trillion or 18.11 percent in foreign currency denominations.

In addition to SBN issuance, debt financing is also derived from government foreign loans with portions reaching Rp777.54 trillion or 19.27 percent. Debt in the form of loans is divided from foreign loans amounting to Rp771, 6 trillion or 19.13 percent and domestic loans of Rp5, 78 trillion or 0.14 percent. (T/RS5/RS1)

Mi’raj Islamic News Agency (MINA)