Monday, June 29, 2009

Goverment needs to better manage foreign debt: analyst

Despite the fact that incumbent President Susilo Bambang Yudhoyono (SBY) has managed to improve the country’s foreign debt to Gross Domestic Products (GDP) ratio, his debt management policy needs to be improved, an economist says.
“The amount of foreign debt is definitely increasing, but that is not necessarily a bad thing. As we can see, the ratio of foreign debt to the GDP has been decreasing,” Sri Adiningsih, from Yogyakarta’s Gadjah Mada University, told The Jakarta Post in Jakarta on Sunday.
“A decreasing ratio between foreign debt and GDP shows that the country’s capability to pay the debt has been gradually increasing,” she added. Public debt has reportedly increased by an average of Rp 80 trillion (US$8 billion) per year during SBY's presidency. As of January 2009, it stood at Rp 1,667 trillion. Around Rp 747 trillion of that debt was in foreign loans and around Rp 920 trillion is from bonds.
Data from the Finance Ministry shows GDP growth has risen faster than foreign debt levels during SBY’s presidency. The ratio of foreign debt to GDP declined to 32 percent during SBY’s presidency, down from 54 percent during the presidency of Megawati Sukarnoputri, who is again running in the July 8 election.

“However, the government also mismanaged the debt allocation in certain policies. For example, the direct cash subsidy (BLT) is also funded by foreign debt,” she said.
“That is the wrong practice of foreign debt allocation. Consumption subsidies must be funded by a predetermined state budget, not by using foreign loans,” she added.
Head of the Anti Debt Coalition (KAU), Dani Setyawan, said that SBY’s presidency showed nothing but a severe mismanagement of foreign debt.
“During SBY’s presidency, the debt was paid using another loan from abroad. The country is pretty much trapped in a circle of unresolved and accumulated foreign debt,” he said. A report provided by the KAU show the country had received around Rp 48 trillion in foreign loans during 2008, but paid around Rp 90 trillion of foreign debt in the same period.
“This condition shows that Indonesia is severely trapped in a vicious debt cycle. The statistics also portray a grim fact that Indonesia is still exploited by the rich countries,” Dani said

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