Government urged to reduce reliance on debt securities

Jakarta (ANTARA) - Senior economist Wijayanto Samirin of Paramadina University has urged the government to reduce its reliance on debt securities as the primary source of state budget (APBN) financing. The move is deemed crucial to maintaining fiscal sustainability while mitigating financing risks amid increasingly selective financial markets.

“Dependence on debt securities needs to be reduced. Currently, 87 percent of government debt is sourced from debt securities,” he said when contacted in Jakarta on Friday.

He argued that such a dominant composition makes state financing more sensitive to changes in market conditions and investor sentiment. While the issuance of global bonds can still serve as an alternative when demand for government securities (SBN) weakens or investors demand higher yields, he considers this instrument merely a short-term solution and not a viable primary fiscal strategy.

He therefore suggested the government increase the proportion of loans from international financial institutions, such as the Asian Development Bank (ADB), the World Bank, the Asian Infrastructure Investment Bank (AIIB), as well as the Japan International Cooperation Agency (JICA) and the Japan Bank for International Cooperation (JBIC).

The proportion of loans from these institutions, he assessed, could ideally be raised to around 30 percent of total government debt. Besides offering relatively lower interest rates compared to market-based financing, multilateral loans generally have longer tenors, helping to manage the government’s debt maturity profile. Another advantage of such loan schemes is the flexibility in the restructuring process should it be required in the future.

“In this context, what Finance Minister Purbaya Yudhi Sadewa has done to secure a loan of 17 billion US dollars from AIIB deserves appreciation,” he added.