Jakarta - Though President Susilo Bambang Yudhoyono said on Sunday that the government was committed to repaying its foreign debts on time to maintain foreign investor confidence in Indonesia, economists warned that falling exports could affect the country’s ability to make those payments.
“I do not want [this country] to be known as a country that refuses to pay its debts,” Yudhoyono said in Magelang, Central Java Province, as quoted by the Vivanews Web site.
Yudhoyono said that if Indonesia earned a reputation for failing to meet debt obligations, trade and foreign investment would be affected. He also said that declining to pay debt was not an honorable act.
The president made the statement in response to critics who said Indonesia should restructure its debts with foreign lenders and channel debt payments to domestic development programs.
Rahmad Waluyanto, the head of the debt management office at the Finance Ministry, revealed late on Thursday that the nation’s outstanding foreign debt stood at $62.7 billion as of the end of February. This includes about $3.1 billion due between April and June of this year.
Yudhoyono said the government was trying to lower its debt-to-gross-domestic-product ratio, which currently stands at 31.3 percent according to the Finance Ministry - an improvement from five years ago, when it was more than 56 percent.
“Our [debt-to-GDP] ratio is declining,” the president said. “It’s the best in Southeast Asia.”
However, Hendri Saparani, an economist at the think tank Econit Advisory Group, said the indicator Yudhoyono used could be misleading.
“The [president’s] use of the indicator is dead wrong,” Hendri said. “It is used by the debtor organizations to indicate whether our debt situation is all right. But what about if our debt level keeps on increasing?
“Moreover, our exports are declining, diminishing our ability to pay our debt installments,” she added.
Hendri pointed out that during the last four years of Yudhoyono’s presidency, Indonesia had been taking on new debt. Data from the Finance Ministry show that during that period, Indonesia took out about $17.1 billion in new debt.
“SBY wants to be a good boy by saying he wants to pay all the debt,” she said. “Nothing is wrong with that, if only he doesn’t continue to create new debts.”
The nation’s exports have declined since October, with the latest data showing a nearly 33 percent year-on-year decline in February, which could be exceeded as the global economy weakens.