Still On The Issue of National Debt

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J. Soedradjad Djiwandono
J. Soedradjad Djiwandono, Emeritus Economics Professor, FEB-UI, Jakarta and Professor of International Economics, S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University (NTU), Singapore.

Jakarta, IO – Last week the headline of this paper was an excellent analysis about our government debt, entitled “The Perils of Mounting Gov’t Debt” written by Gede Sandra. I had mentioned the matter several times in columns in this paper, regarding a closely-related issue: the low tax ratio we have and maybe part of the explanation as to why so, stating about the problem of tax avoidance that must be rampant. The subtitle of last week’s headline is also very important, which was expressed as “How the rich get richer, and the poor get poorer”. 

How a mountain of debt develops 

As mentioned above, it is indeed important for the public to know that indeed mounting government debt is something none of us can take lightly. It is true this is a peril for us, for future generations. Even if the funds that resulted in the debt have been used responsibly, the burden of repayment of both interests and principal is very burdensome. Surely, if it has been used to finance useless projects or wasted, possibly siphoned off by corrupt players, it would even be worse. Let us hope this is not the case. 

As I have been trying to remind all, I think it is very irresponsible for anyone to keep saying that our government debt is still very safe. As Gede Sandra correctly mentioned, it is not just the government debt which keep increasing, but also the debt of state-owned enterprises (SOEs). I prefer using the term “national debt” to include not just government debt, but also debt incurred by SOEs. And if we include this, then the figure is even more staggering.