ADDITIONAL debt on a jumbo scale is considered to be risky for the country’s financial condition. Especially if the debt is in the midst of falling revenues in the State Budget (APBN).
“Increasing debt with unsustainable state revenue conditions is certainly very risky,” said Member of Commission XI of the Indonesian House of Representatives, Anis Byarwati to Indonesian MediaSaturday (13/7).
Indonesia’s income has so far been supported by leading commodities. When the price of domestic commodities increases at the international level, income will increase through tax revenues.
On the other hand, when the prices of leading commodities decline, state revenues will also decline. This, according to Anis, is a picture of an unsustainable income condition.
The state revenue pool also has the potential to shrink because the World Bank predicts a potential decline in the world commodity price index in 2024 to 105.3 and 2025 to 101.6.
The index is far below the price index in 2022 which even reached 142.5 and 2023 which was at 108. In fact, said Anis, the prices of mineral and coal commodities which are the mainstay of exports and state revenues are predicted to experience a drastic decline.
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In addition to unsustainable income, Indonesia’s debt pile is also said to be in a worrying position. As of April 2024, for example, the country’s maturing debts until 2030 reached Rp4,615.26 trillion.
“This is just the debt that has matured, not including the total debt,” said Anis.
Logically, it is considered to be inversely proportional to the government’s statement that the current debt position is in a safe condition. “This claim is based on the debt to GDP (Gross Domestic Product) ratio, which does not accurately describe the state revenue conditions used to pay debt,” explained Anis.
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GDP, he said, only describes the added value of the economy nationally, not the ability to pay debts. In fact, the debt risk profile can be seen with a more ideal ratio, such as the Debt to Service Ratio (DSR).
DSR describes how debt is compared to the ability of foreign exchange to pay the debt. If debt increases without being followed by an increase in exports and other foreign exchange earnings, then the availability of dollars to pay the debt will be increasingly limited, which will ultimately have an impact on the exchange rate.
A safe DSR ratio is 20 percent. However, since 2015, Anis added, Indonesia’s DSR ratio has consistently been above 24%. He did not deny that there was a decline during the commodity boom in 2020-2022, but this condition was not sustainable.
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“This is a real alarm for Indonesia’s fiscal and economic conditions,” he explained.
“So, the government’s claim regarding safe debt conditions is not right because it does not look at the more ideal ratio, namely DSR, which shows a higher risk to the economy,” concluded Anis.
His explanation was related to the news that broadcast Hashim Djojohadikusumo’s statement regarding President-elect Prabowo Subianto’s plan to increase the debt ratio to 50% of GDP when he takes office.
He said the increase in the debt ratio was done to fund a number of programs that were considered strategic. In line with the increased ratio, Hashim said the president-elect would also seek to increase the tax ratio. (Z-6)
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