IO – Quite a few Indonesian economists are focusing on foreign debt as the most influential factor in attempting to kick-start the sickly national economy. This ambitious attitude encourages the Government to load up with as much debt as possible, whether from foreign sources or from international private agencies. Imagine: in 2014, total Government debt stood at USD 129.736 billion, shooting up to USD 190.465 billion in Quarter 1 of 2019, representing a rise of 47%! Nearly half the amount again!
It turns out that this fantastical bulk-up of Government debt has not in fact sparked economic growth: within the past five years it is reported at 4.75%-5.2%, projecting a downtrend in the near future. In other words, our debt soars as our economy stalls. How is this possible?
One key element is the extreme imbalance in USD-IDR exchange rate over recent years. The average exchange rate before the Jokowi-JK term was an annual IDR 10,000.00 per USD 1.00, while the Rupiah currently swaps for IDR 14,000.00 per USD.
Let’s also consider the extreme expansion of Government Bonds (Surat Utang Negara – “SUN”). Total in 2014 was IDR 1,101,648 billion, billowing to IDR 2,131,895 billion by June 2019 – an increase of Rp 1,030,247 billion or 94%. Amazing! That nearly doubles the obligation!
What about Government Shari’a Commercial Papers (Surat Berharga Syariah Negara – “SBSN”)? In 2014, the total was reported at IDR 143,901 billion, increasing to IDR 460,468 billion in June 2019. That’s a 220% increase, of IDR 316,567 billion!
That only covers Government of Indonesia debt and bond issuances. What about private debt? Bank Indonesia data notes that private foreign debt in 2014 totaled USD 163,592 billion. The total in Quarter 1 of 2019 was USD 197,127 billion, up 20%.
The fact that our economic growth has nosed downward, despite taking on a vast load of foreign debt (particularly those assumed by the Government) is sheer anomaly. Most countries do not suffer reduced growth when they hold high foreign debt, as they tend to apply such loans to stimulate their economy. Our situation does not fit any existing economic theories either.
This peculiar conundrum gives rise to speculation: “Could it be that these debts are not applied to development, but for other purposes? Could these funds be drained off by corrupt officials instead?” This is entirely possible.
After all, Indonesia has never investigated the connection between national debt and corruption. We have long hoped to get President Jokowi’s attention, in the attempt to understand the gravity of this issue and instruct the Corruption Eradication Commission (Komisi Pemberantasan Korupsi – “KPK”) to mount an investigation, or even to set up sting operations.