THE PERILS OF MOUNTING GOV’T DEBT How the rich get richer and the poor get poorer

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GOV’T DEBT
Illustration: LEONARDO A. PUTONG

Jakarta, IO – Based on Indonesia’s public sector debt statistics, the position of the central government’s gross debt at the end of 2014 was US$209 billion (Rp2,599 trillion, based on exchange rate then). Seven years later, by end of February 2022, this has ballooned to Rp7,014 trillion, up by 170%. 

Jokowi has amassed a total of Rp4,415 trillion in public debt throughout his presidency. The increase in debt during his presidency is significantly more than the total debt amassed by all Indonesian presidents before him. We aren’t even discussing debt owed by state-owned enterprises (SOEs). SOEs are not constitutionally classified as part of the public sector, according to a 2012 judgement by the Constitutional Court. This legal argument may be accepted, but the fact remains that when SOEs lose money, the government always bails them out, and their debt is finally paid by the public. 

The increase in SOE debt during Jokowi’s presidency has also been significant. Non-financial SOEs had a debt position of US$40 billion at the end of 2014. (Rp504 trillion). After seven years, it has more than doubled to Rp1,012 trillion at the start of 2022. The total increase in debt from the public sector and state-owned enterprises (SOEs) under Jokowi’s presidency was Rp4,923 trillion. 

So, with all of this debt, what have the Indonesian people gotten out of it? 

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GDP per capita increased by 41 percent from US$3,491 (Rp41.8 million) in 2014 to US$4,350 (Rp62.2 million). This indicates that GDP per capita only grows at a rate of 5.8% on an annual basis. It’s like night and day when compared to the 170 percent increase in public sector debt in seven years, or 25 percent a year. 

GOV’T DEBT

What about the poverty rate? There were 27.7 million impoverished people at the end of 2014. (10.96 percent of the population). In 2021, 26.6 million people were living in poverty (9.7 percent of the population). As a result, under Jokowi’s seven-year presidency, the poverty rate was only reduced by 1.1 million people. In comparison to the amount of debt he has accumulated, it is insignificant. 

How about the unemployment rate? The unemployment rate was 7.2 million people at the end of 2014. Meanwhile, by the end of 2021, the population had risen to 9.1 million. So, during his administration, unemployment rose by 1.9 million people in just seven years! This indicates that his administration’s debt has failed to eliminate unemployment. 

To summarize, the additional Rp4,923 trillion debt accumulated by the Jokowi administration has had no influence on enhancing the wellbeing of Indonesians. Per capita income climbed at a rate of 5.8% per year, whereas debt expanded at a rate of 25% per year. Poverty decreased by only 1.1 million people, while unemployment climbed by 1.9 million! This demonstrates that the handling of government debt has been incredibly inefficient.