Govt aims to cut down debt ratio to 60%
Govt aims to cut down debt ratio to 60%
Berni K. Moestafa, The Jakarta Post, Jakarta
The government said on Monday it aimed to lower the country's
debt-to-gross domestic product (GDP) ratio to 60 percent by 2004
from about 83 percent currently, hoping to lift a massive burden
from the state budget.
It said Indonesia's total debt to the end of December this
year would remain at US$129.7 billion, as against $139 billion as
of April last year.
A debt of $129.7 billion at an exchange rate of Rp 10,400 to
the U.S. dollar translates to an 83 percent debt-to-GDP ratio.
That is assuming a GDP of Rp 1,688 trillion (about $160 billion),
which the state budget targets for this year.
GDP is the total value of goods and services produced in a
country during a specific period.
Coordinating Minister for the Economy Dorodjatun Kuntjoro-
Jakti said the country's sovereign debt stood at $71.4 billion to
the end of Decmber 2002.
Of that amount, $58.3 billion was the government's, and the
remaining $13.1 billion belonged to Bank Indonesia, he said.
Domestic debt, which consisted of government bonds injected
into local banks, amounted to Rp 606 trillion, he said.
"The government's foreign debt management policy focuses on
lowering the debt-to-GDP ratio to 60 percent by the year 2004,"
he said in a statement.
By 2004, the government hopes to achieve a balanced state
budget, which is suffering from a chronic deficit.
The single largest contributor to the budget deficit by far
remains government spending on debt repayments.
This year alone, the allocation for debt repayment hits Rp
136.l9 trillion, or a hefty 40 percent of the entire budgetary
expenditure.
As a consequence of such budgetary constraints, there is
little room left for crucial development spending, which spurs
economic growth.
But despite the government's limited capacity to boost the
economy, Dorodjatun said it would achieve the lower debt-to-GDP
ratio through economic growth.
Speaking after a Cabinet meeting, he explained that economic
growth increased Indonesia's debt payment capacity.
The 2002 state budget assumes an economic growth rate of 4
percent, from around 3.5 percent last year.
But while the economy could expect little from the budget, it
may also not get the same boost it did last year from other
economic key drivers.
Fueling last year's economy mainly was robust domestic
consumption, and Dorodjatun admitted Indonesia could not rely too
much on that now.
Consumer spending, some analysts believed, could tail off this
year on inflationary pressure and a lack of revenue growth.
The outlook on other key economic drivers remains uncertain.
Both investment and exports have fallen sharply on the double
impact of Indonesia's adverse investment climate and a downturn
in the global economy.
Whether or not foreign investors are willing to return hinges
much on the government's resolve to dispose of its assets amid
strong antiforeign sentiment.
On exports, there is some hope of a turnaround in the global
market later this year. But chances are slim that the rebound
will be soon enough to push export sales out of their current
slump.
Dorodjatun said that some foreign institutions had already
raised doubts on Indonesia's ability to serve its debts.
"They (foreigners) have expressed some concern on our payment
capacity," he said without elaborating the foreigners' concerns.
He added Indonesia's foreign debts, which consisted mainly of
soft loans, were far more manageable compared with its domestic
ones.
Most of the Rp 606 trillion in domestic debt is owed to local
banks, which the government bailed out from the impact of the
1997 financial crisis by injecting with government bonds.
Unlike the foreign debts, the government is unlikely to
restructure these bonds for fear it would destabilize the fragile
banking industry.