“Stop adding new debt…” published by one of the english news papers in Indonesia. One of the NGO’s who addresses it self as anti-debt group, urges the govt to stop adding new debt to fund the state budget due to the high amount of un disbursed loan commitments. Their main concern is that the budget for commitment fee as a consequence of not disbursing the amount of loan commitment can be allocated to help the govt in financing budget deficit. In other words, education budget which was previously promised to be increased to 20% would at least becomes viable. I, by no means, disagree that the govt should eliminate undisbursed loans in order to minimize commitment fee. However, it doesn’t necessarily associate with the govt’s initiation for adding new loan. As the new playing rule has been in place, the govt will not sign the agreement of new project loan unless the readiness criteria of the project has been fulfilled.
Furthermore, commitment fee does not directly link with program loan, as the report might assume. Program loan, by design, is fast-disbursed loan. It means once the agreement has been signed the commitment can be disbursed. Thus, commitment fee may not be applicable.
“Adding more debts makes the government unable to formulate adequate state budget”, the coordinator of the NGO said. To be honest, our government now relies more on debt financing, since raising tax ration will not be politically sound. However there has been a shifting of types of instrument which can obviously seen from the composition of government loan and securities. Government loan tend to decrease while government debt securities is in increasing trend. The high amount, in my opinion, does not matter. What matters here is the debt to GDP ratio in which, in this case, Indonesia has the decreasing trend. In 2000, the number was 88 % while last year it accounted for 39%. This year, using new revised budget assumption, the debt to GDP ratio is projected to be around 37%. Sounds optimistic, isn’t it ?
Well I guess I have to stop now. I need to discuss with my colleague about the new scheme of remunerations in my office, which potentially increases my spending budget for …. mmm the next holiday 🙂 … escape from managing govt debt for a while.