Questioning The Government Debt and State Budget Deficit, Is It Serious Problem?

Finance Minister Sri Mulyani Indrawati has told the public not to worry about the government debt and state budget deficit because they are in secured condition, because many factors should be considered when assessing the government debt and state budget deficit.

The state budget deficit would reach only about 2.67 percent by the end of 2017 after considering spending in government institutions, which were usually at between 95 and 97 percent of their respective allocations. It could not be compared with the situation in 2010 when she was also the finance minister under then president Susilo Bambang Yudhoyono. At that time the state budget was recorded at Rp 900 trillion, while this year, the state budget reached Rp 2 quadrillion.

As reported previously the government debt was recorded at Rp 3.67 quadrillion (US$275.09 billion) in the first half of 2017 and the state budget deficit was assumed to be at Rp 397.20 trillion or 2.93 percent of gross domestic product (GDP) by the end of this year.

Of the Rp 3.67 quadrillion (US$274.23 billion) in government debt in April, Rp 810 trillion will fall due in 2018 and 2019, Finance Ministry data show. However, argued that total government debt was only 28 percent of gross domestic product (GDP), far less than the 60 percent allowed by law.

Records of the ministry’s Directorate General of Financing and Risk Management reveal that Rp 390 trillion will mature in 2018 and Rp 420 trillion in 2019.

When President Joko “Jokowi” Widodo took office in 2014, government debt was Rp 2.60 quadrillion, meaning that during the three years he has been in office, government debt has increased by Rp 1.07 quadrillion.

The government has been forced to seek loans to cover the state budget deficit as state revenue is always less than state expenditure. This year, the deficit is estimated to reach 2.6 percent of the total state budget of Rp 2 quadrillion.

Is It Serious Problem?

The government debt was at a safe level as it was below 30 percent of gross domestic product (GDP). She added that the position was much better than that of Brazil, Mexico and Argentina. However, the government would maintain the state budget deficit at less than 3 percent as required by the State Finance Law.

Basically, the government debt and state budget deficit don’t be serious problem because obviously the government will always protect the Indonesian economy and manage debt carefully and transparently so that there is no cause for concerning regarding government debt reaching Rp 3.67 quadrillion (US$274.23 billion) in April, Rp 201 trillion more than in December 2016.

Essentially, the Jokowi’s administration will be prudent to use all of state budget to increase and maintaining national development progress. As we now together, to enhance and establishing national economic, we have several basic problem especially un-ready infrastructure in many provinces. Un-ready and un-complete infrastructure are point of an economic weaknessess in Indonesia which is caused a foreign investors didn’t enjoy to safe and to invest their capital in Indonesia.

Meanwhile, un-ready and un-complete an infrastructure in Indonesia make the level of safety doing business in Indonesia doesn’t have a business competitive attractiveness.

Realizing about the current and basic conditions, Jokowi’s administration has been decided to built an infrastructure at all of part of Indonesia from Aceh to Papua, because infrastructure readiness can be conjured an economic progress significantly.

Besides that, it could make investor autenthiasm to invest their money in Indonesia and the affect of one is to spur a new point of local business and new enterpreneur in Indonesia. However, the government decision to build infrastructure as a main project at Jokowi’s administration is acf of valor from this government to robust national economic atmosphere.

Be political issues

For Jokowi’s political opponents, the increase of government debt and state budget deficit will be politicized as the failure of government to use and maintain public money for their next prosperity and worthyness. Be remember, the current government debt is an accumulation from earlier government era until Jokowi’s era.

Essentially, many issues can be used by Jokowi’s political opponent to downgrade Jokowi’s electability and the public truthness to government such as government debt and state budget deficit, communism raise issue, rising electricity tarrif, the government in lieu of law number 2/2017 til new general election bill specially over 20% presidential threshold.

One strategy, one way and one efforts should have taken by Jokowi’s administration to maintain and to keep public truthness to them is maximalizing government efforts and government apparatus service to our people. Jokowi’s administration must be shown that all of an infrastructure project would be finished and used at the end of 2018. If it is happens, Jokowi will be easy to be reelected in presidential elections in 2019. Because of that, the next political turbulence will be predicted more than higher from this time, because all of Jokowi’s rival will be all out to downgrade his prospect and his chance through every political step from soft way until brute way.

Lastly, we will see what is this prediction will be true or false. Any comment?

*) Toni Ervianto, Political and security researcher and analys at Cersia, Jakarta.