Politication of Foreign Debt

Bank of Indonesia (BI) in mid-July 2017 reported the amount of Indonesia's Foreign Debt (ULN) at the end of the first quarter of 2017 reached 326.3 billion US dollars. Indonesian ULNs are grouped under three groups: the Government, the Central Bank, and the private sector. This figure has increased 2.9 percent on an annual basis (yoy) compared to the previous quarter which reached 2 percent (yoy). The increase in ULN was affected by the smaller contraction of private ULN growth in the first quarter of 2017, ie minus 3.6 percent (yoy) compared to minus 5.5 percent (yoy) in the previous quarter. The general public debt slowed from 11 percent in the first quarter of 2016 to 10 percent (yoy) in the first quarter of 2017. With this growth, Indonesia's GNI ratio to GDP at the end of the first quarter of 2017 was relatively stable at around 34 percent At the end of the fourth quarter of 2016. However, it decreased compared to the first quarter of 2016 which was 37 percent.

Official information exposed by BI, including private ULN position at the end of the first quarter of 2017, concentrated in the financial, manufacturing, mining, and electricity, gas and water sectors, triggered further reactions from economists and not least politicians Monitor the progress of ULN and criticize the impact of ULN in supporting the optimization of development financing without causing risks that could affect domestic macroeconomic stability. Criticism of the Government Debt increase was ultimately fixed on Jokowi Government with various politicizations related to the position of Indonesian ULN.

The total debt position of the Government when Jokowi newly inaugurated as President in 2014 has reached about Rp.2.700 trillion. And now, the total debt position of the Government as of June 2017 increased to Rp.3.700 trillion. Despite the addition of ULN amounting to Rp.1.000 trillion, but according to Luhut Binsar Panjaitan as Coordinating Minister Kemaritiman, the total debt of the Government is considered not quite when viewed from the ratio of GDP. The percentage of debt ratio to Indonesia's GDP is still lower than that of other countries. One of the indicators that can be used to see the Government's ability to overcome the state's financial burden is the Debt to GDP Ratio. Debt to GDP Ratio represents the ratio of Government Debt to Gross Domestic Product (GDP). This ratio describes the health of ULN use by the Government.

Under Law No. 17 of 2013 on State Finances, for the limit of EDR ratios described in Article 12 paragraph 3 explains that the loan amount is limited to a maximum of 60 percent of Gross Domestic Product. This is the reference of the Government of Indonesia to declare that ULN is still safe. This is also an early indication that the Government's budget is healthier, as the ability to pay for ED increases. However, the management of ED must remain a concern of the Government, because if it does not put forward the principles of accountability and transparency, especially if there is bad faith to misuse it, it will have a direct impact on the people. Because how not, the people who will bear the debts due to the acceleration of development programs do not run according to the program that has been declared by the Government. Ultimately, ED is useful when it is destined for productive activities to promote economic growth.

The government also acknowledged that Indonesian ULN growth is relatively fast. Until the end of April 2017, Government debt reached Rp 3.667 trillion, up Rp 201 trillion compared to December 2016 position. The increase in the number of Indonesian ED is due to the need of the State to build infrastructure, which is not enough if only rely on the state budget. Coordinating Minister for the Economy, Darmin Nasution stated, the Government has made various efforts so that development costs are not continuously dependent on debt funds and change the schemes of development financing.

Changes in the current development scheme focus more on the role of the private sector financing development projects. That way, the Government's budget is not expected to swell. The private sector's role in development financing is very high at 42 percent or Rp 1,974 trillion. The remaining 33 percent or approximately
Rp1.551 trillion came from the Government and 25 percent or
Rp1,175 trillion came from State-Owned Enterprises (BUMN).

Minister of Finance of Indonesia, Sri Mulyani Indrawati also emphasized the need to reduce the Government Debt by focusing on funding of development to be reduced from debt. To that end, tax revenue should be raised. And to be more optimal, tax revenue is pursued by reforming the tax system and monitoring the potential revenue from various economic activities. In addition to raising tax revenues, the Government will also implement careful spending allocations. Currently, the preferred expenditure is education spending, health that can not be postponed.

However, BhimaYudhistira, an economist at the Institute for Development of Economics and Finance (Indef), said that Indonesia's debt maturities are likely to pose a threat to the new Government by 2019. The reason is that the burden of repayment of principal and interest on the debts is getting bigger, so any party that won the 2019 presidential election will be forced to issue bonds because of the decrease of fiscal credibility which resulted in the decrease of investor confidence to the threat of crowding out alias liquidity seizure between government and market participants. Criticism of the Government's debt increase began to be directed to the Jokowi Government with various politicizations related to the position of Indonesian ULN, even starting to be directed to political contest of Presidential Election in 2019.

President Jokowi through the nine development priorities (NAWA CITA) proclaimed, there are three activities related to the economic development strategy, which is to build Indonesia from the periphery by strengthening the region and village in the framework of the unitary state. Indonesia needs to increase productivity and competitiveness in international markets and economic independence by mobilizing domestic strategic sectors.
The direction of national economic development policy cannot be separated from the vision stated in the National Long Term Development Plan (RPJPN) in 2005 until 2025, namely Indonesia which is independent, advanced, fair and prosperous (Law No.17 Year 2007). This vision leads to the achievement of the National Goal listed in the preamble of the 1945 Constitution of the Republic of Indonesia (NRI) is to protect the whole Indonesian nation and the entire Indonesian blood sphere and to promote the common prosperity, to educate the nation and to carry out the world order.

To realize it all, the Government actually has an instrument to encourage national economic growth, namely the credible and strong state budget. With a per capita income of almost US $ 4,000 and a population close to 250 million people, the Indonesian economy is currently entering the Middle Income Country. The government should use all of these instruments, supported by efforts to strengthen the internal factors of the nation among others, improving the quality of human resources, improving the implementation of national values in every behavior of economic actors, reducing income inequality, and mobilizing awareness of public productivity in the domestic strategic sector, Overcoming various national economic problems including repayment of ED and realizing economic independence, so that Indonesia can become a country with a fifth big economy in 2045.
                         
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*) Social and Politics Observer.