When speaking with Indonesians about the performance of the Indonesian government under the leadership of President Joko Widodo, high government debt is usually mentioned as a key source of concern (especially in case the conversation partner is not supportive of the Widodo administration).
Opposition has often been critical of rising government debt in Indonesia over the past couple of years. In fact, presidential candidate Prabowo Subianto nicknamed Finance Minister Sri Mulyani Indrawati Indonesia’s “debt printing minister”. However, are these concerns legitimate?
Indeed, Indonesia’s government debt has risen from IDR 2,608.8 trillion (approx. USD $185.0 billion) in 2014 to IDR 4,418.3 trillion (approx. USD $313.4 billion) in 2018. That is an increase of nearly 70 percent (and with most of Indonesia’s foreign debt being US dollar-denominated, the 20 percent depreciation of the Indonesian rupiah against the greenback - over that period - has made it look worse).
However, when we talk about debt, then there are two important matters that need to be taken into account. One, we need to put debt into perspective by presenting it as a percentage of the country’s gross domestic product (GDP). This way we can really determine whether debt is big or small. Second, it is important to know how the debt is used. When debt is used productively it will add value to the economy, for example by generating new (structural) revenue streams and job opportunities (for example when debt is used to develop a new industry that will export products and needs plenty of local workers, or when debt is used for infrastructure development which should give rise to the kicking in of the so-called multiplier effect).
This article discusses the following:
• How Indonesia's debt has risen over the past couple of years and what it is used for
• Puts Indonesia's debt in perspective by comparing it with the country's GDP as well as with other countries debt
• What does Indonesian debt consist of (bonds, loans, etc.)?
Read the full article in the April 2019 edition of our monthly research report. You can purchase the report by sending an email to email@example.com or a WhatsApp message to the following number: +62(0)8788.410.6944
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