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NEWS UPDATES 29 June 2009

Indonesian govt urged to better manage foreign debt 

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Despite the fact that incumbent President Susilo Bambang Yudhoyono (SBY) has managed to improve the country’s foreign debt to Gross Domestic Products (GDP) ratio, some of his policy on the debt management is considered to be improper, the Jakarta Post reported, quoting an economist.

“The amount of foreign debt is definitely increasing, but that does not necessarily mean a bad thing. As we can see, the ratio of foreign debt to the GDP has been decreasing,” Sri Adiningsih from Yogyakarta’s Gadjah Mada University told the daily on Sunday.

“A decreasing ratio between foreign debt and GDP shows that the country’s capability to pay the debt has been gradually increasing,” she added.

Public debt has reportedly increased by an average of 80 trillion rupiah ($7.94 billion) per year during Yudhoyono's presidency. As of January 2009, it stands at 1,667 trillion rupiah. Around 747 trillion rupiah of that debt was in foreign loans and around 920 trillion rupiah in bonds.

Data from the Finance Ministry shows that the GDP growth has faster acceleration than foreign debt acceleration during Yudhoyono’s presidency.

The ratio of foreign debt to GDP declined to 32 percent during his presidency from 54 percent during the presidency of Megawati Sukarnoputri, one of the incumbent’s presidential contender in the July 8 election.

“However, the government also mismanaged the debt allocation in certain policies. For example, the direct cash subsidy (BLT) is also funded by foreign debt,” she said.

“That is a wrong practice of foreign debt allocation. Consumption subsidies must be funded by a predetermined state budget, not by using foreign loans,” she added.

Head of the Anti Debt Coalition (KAU), Dani Setyawan, said that Yudhoyono’s presidency showed nothing but a severe mismanagement of foreign debt.

A report provided by the KAU revealed that the country had received around 48 trillion rupiah in foreign loans during 2008, but paid around 90 trillion rupiah of foreign debt in the same period.

“This condition shows that Indonesia is severely trapped in a vicious debt cycle. The statistics also portray a grim fact that Indonesia is still exploited by the rich countries,” Dani said.

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