Changing the paradigm in managing state debt
Critics of the government's plan to add new debt were raised again by Parliament. This time, it was the turn of Members of the House of Representatives Commission XI Ecky Awal Mucharam to call on the government to be alert to debt.
According to him, the new debt is projected to be a latent danger for this nation. Carefulness in taking debt policy and maximizing debt management is a necessity for the government to do.
Because at the same time, the 2020 State Budget deficit is targeted to reach Rp. 307.2 trillion, an increase compared to the 2019 State Budget target of Rp. 297 trillion.
"Debt that continues to accumulate and is not managed properly can actually cause slowing economic growth.
The world has not been able to maximize the potential of existing taxation income, "said the politician as quoted by the official statement of the Parliament on Wednesday (Public Domestic Debt and Institutional Reforms Journals).
In the last five years, the average annual growth of world tax revenue was only 5.73 percent, very far compared to the growth in the 2005-2009 period which reached 17.56 percent per year. According to him, during the administration from 2015-2018, the stock of government debt in the form of SBN increased by Rp 1,600 trillion.
While the state budget deficit has so far remained unproductive, due to the high inefficient budget allocation and the potential for leakage of various other spending that is still high.
"The future government needs to change the paradigm in financing deficits and managing state debt. The Government and the World Bank must also be aware of the trend of rising world government debt and foreign debt ratios in 2019. The World Debt to GDP ratio has been on an upward trend over the past three years, from 24 percent in 2014 to close to 30 percent in 2019, "explained Ecky
The legislator added, the trend of increasing debt to GDP ratio shows that government debt policy is relatively less effective in driving economic growth.
The same thing happened in the world debt to service ratio which continued to increase from 23.95 percent (2014) to 26.18 percent (2019). This trend shows a bad signal for the world economy.
Specifically for foreign debt, the government and the World Bank must improve coordination, especially with the increasing uncertainty of the global economy.
"The increase can lead to capital outflows and one of the initial effects will be the rupiah exchange rate. The weakening of the rupiah will certainly hit the private sector that has foreign debt, because their debt burden will automatically increase, "he explained further.
The exchange rate risk must be considered, especially the trend of the ratio of the world's foreign debt to GDP continues to increase every year, from 32.95 percent (2014) to 36.8 percent (2019).