Govt debt ratio target unrealistic: CSIS<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
Government plans to cut its debt level to around 60 percent of
\ngross domestic product (GDP) by 2004 is an unrealistic target,
\nthe Center for Strategic and International Studies (CSIS) say.<\/p>\n
The prestigious private think tank said that achieving the
\ntarget required an average economic growth of 6 percent per year
\nand a relatively low inflation level of also around 6 percent.<\/p>\n
CSIS economist Tubagus Feridhanusetyawan said on Thursday that
\nunder the current conditions, the required growth and inflation
\nrate were very unlikely.<\/p>\n
\"In a realistic scenario, the government would be able to
\nlower the (debt) ratio to 70 percent only by 2010,\" Tubagus told
\na seminar on the debt problem.<\/p>\n
Tubagus was presenting a paper prepared with fellow CSIS
\nsenior economist Mari Pangestu.<\/p>\n
He added that their paper was based on assumptions of economic
\ngrowth of 3.5 percent and a moderate inflation rate of 10
\npercent.<\/p>\n
Coordinating Minister for Economy Dorodjatun Kuntjoro-Jakti
\nsaid earlier that the government aimed to lower the debt-to-GDP
\nratio to 60 percent by 2004, which is the end of President
\nMegawati's current tenure.<\/p>\n
The move was part of efforts to reduce the massive burden the
\ndebts place on the state budget.<\/p>\n
This year alone, the state budget has to allocate Rp 136.19
\ntrillion for debt repayment. That accounts for some 40 percent of
\nstate expenditure.<\/p>\n
The latest data shows that the country's total debt to
\nDecember this year would likely remain at US$129.7 billion, or
\nmore than 80 percent of this year's estimated $160 billion GDP.<\/p>\n
GDP measures total value of goods and services produced in a
\nyear.<\/p>\n
Of the total public debt, some $60 billion came from domestic
\ndebts, consisting of government bonds injected into local banks
\nduring the financial crisis.<\/p>\n
In the seminar, it was unanimously agreed that such budgetary
\nconstrains had limited the budget's allocation for crucial
\nspending, which could have generated higher economic growth.<\/p>\n
Both Tubagus and Mari suggested the government and Bank
\nIndonesia develop a comprehensive and integrated debt management
\nteam to deal with both external and domestic debts.<\/p>\n
For overseas debts, efforts to negotiate debt-rescheduling
\nprograms with international creditors such as the Paris Club of
\ncreditor nations should carry on.<\/p>\n
The government is scheduled to meet with the Paris Club in
\nApril to reschedule maturing debt repayments.<\/p>\n
On the domestic front, while speeding up assets sales and
\nprivatization programs remains necessary, creating a mechanism
\nfor bond refinancing will also be crucial.<\/p>\n
The government and the House are currently debating new draft
\nlaws on bonds which will provide the legal basis for the
\ngovernment to refinance some Rp 3.9 trillion worth of bonds
\nmaturing this July.<\/p>\n
Refinancing old maturing bonds means issuing new bonds to
\ncover the payment.<\/p>\n
IMF's senior representative for Indonesia David Nellor, who
\nwas also present at the seminar, said that economic growth was
\nthe key to breaking the debt cycle.<\/p>\n
Nellor said that the debt-to-GDP ratio of 60 percent could be
\nachieved within around five years, if the country managed to
\nreach an average economic growth of 5-6 percent.<\/p>\n
The official target of this year's growth stands at four
\npercent compared to 3.5 percent last year.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/govt-debt-ratio-target-unrealistic-csis-1447893297",
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