Economy stagnant, even stalling as Government debt skyrockets

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.