Government Debt Predicted to Break Rp 5,000 Trillion, How It can be?

The total government debt is predicted to exceed Rp 5,000 trillion by 2020. Debt will continue to swell if the government does not implement policy reforms in debt management.

In response to these estimates, Director of Strategy and Debt Portfolio of Directorate General of Financing and Risk Management (DJPPR) of the Ministry of Finance, Schneider Siahaan said the policy of adding debt is a political policy between the government and Parliament.
The government debt estimate in 2020 is still too early to be confirmed, because the policy of adding debt is the government’s policy and the House of Representatives (DPR) in the Act (APBN), so that figure can not be verified, “said Schneider when contacted by, Jakarta, Thursday (22/2/2018).

Contacted separately, Director General of PPR Ministry of Finance, Luky Alfirman said the addition of government debt is a consequence of the existence of budget deficit policy.

“The system and budgeting structure in APBN, if deficit, needs financing which is currently filled with most of the issuance of Government Securities (SBN),” said Luky.

That is, as long as the State Budget (APBN) is still deficit, then the government still needs financing to patch up the deficit.

This financing comes from the issuance of government securities and loans. For example in APBN 2018, the government set a deficit of Rp 325.9 trillion or 2.19 percent of Gross Domestic Product (GDP).

To cover the deficit, the government needs financing to come from debt of Rp 399.2 trillion. Derived from the issuance of Government Securities (SBN) amounting to Rp 414.5 trillion and negative net loan of Rp 15.3 trillion.

The government, continued Luky, seeks to keep the deficit limit below 3 percent of GDP according to the mandate of the State Finance Law. Including reducing the primary balance in the state budget.

“We also continue to allocate debt interest payment as well as repayment of principal (debt),” he explained.

From Ministry of Finance data, the government’s debt interest payment in January 2018 amounted to Rp 23.2 trillion. This figure is up compared to the same period last year valued at Rp 22.6 trillion.

In order to keep the fiscal sustainability, Luky admitted, the government sees the debt ratio to GDP ratio in line with the State Finance Law with a limit of not exceeding 60 percent of GDP.

“This year, the ratio of government debt we expect will reach 29.1 percent or still far from the limit, so it is still quite safe and under control,” he said.

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