Use debts productively

Use debts productively

What caused the Mexican financial crisis? The larger part of the inflowing foreign capital was not being used productively. As soon as signs of a crisis appeared, the money fled abroad. The country's foreign exchange reserves, which fell from US$30 billion to $6 billion, was also not being used productively. It was used to bolster the peso and to import consumption goods.

The matter of economic productivity was once again mentioned by Prof. Sumitro Djojohadikusumo, our highly respected economist, when he spoke of our foreign debt burden. The important thing, he warned, was to use the money to finance productive economic activities so that the rewards can be used to repay those debts. As an example of the unproductive use of money he mentioned the building of golf courses.

Of our foreign debt burden which is now nearing the $100 billion mark, $52 billion are incurred by the government and the rest by the private sector. The principle is valid in both cases: the important thing is not the total but our ability to repay both the principal and interest. If our economic productivity increases, the increase in our foreign debts will pose no problem.

-- Kompas, Jakarta