News Focus: INDONESIA'S DEBT RATIO DECLINING By Andi Abdussalam

Jakarta, June 17 (ANTARA) - Although Indonesia's external debts have increased from Rp1,275 trillion in 2004 to Rp1,667 trillion in 2009, their ratio against the country's gross domestic product (GDP) had declined from 57 percent to 32 percent.

"Indonesia's debt ratio against its gross domestic product has in the past five years continued to decline, even lower than those of advanced states, because its GDP is also increasing," Finance Minister Sri Mulyani said.

In 2008 the debt ratio of Indonesia against its GDP was 32 percent while that of Japan was 200 percent. In the meantime, according to the minister, the United States' debt ratio against its GDP was 81.2 percent and Britain 61 percent. This means that the ratio of debts of the advanced countries is big and their debt ratios against their GDP were also big.

"But the local non-governmental organizations do not kick a fuss over the Japanese debts, while their counterparts in Indonesia, though its debt ratio is small, always raised anger and criticism," the minister questioned.

In addition, the ratio of Indonesia's debt interest against its revenues and expenditures is also small, namely between 9.8 and 10 percent.

Until March 31, 2009) Indonesia's debts which have fallen due amounted to Rp64 trillion in foreign loans and Rp30 trillion in promissory notes.

The minister explained matters about the government debts in response to the many criticism and discourses among non-governmental organizations (NGO) and observers on Indonesia's debts. This linked with the on-going presidential campaigns. The country's debts issue is always taken up as a theme of a campaign to evaluate the government's performance.

"Although the government has managed its debts well, I think people will continue to criticize it," the minister said in a press conference on Sunday.

She said that as long as the criticism was based on complete information she would be ready to give response but if it was only a rhetoric and had no much advantage, she would ignore it.

Economic observer of Yogyakarta-based Gajah Mada University (UGM) Revrisond Baswir recently called on the government not to seek new foreign loans. The total interest the government has to pay has risen from Rp62.5 trillion in 2004 to Rp101.7 trillion in 2009.

The debts have caused Indonesia's foreign exchange reserves to continue to deplete. With debts, the government has to pay the principals of its debts and their interest, while the borrowed funds never actually entered the country because the government's expenditures were made overseas.

According to economist Fadhil Hasan of the Institute for Development of Economics and Finance (INDEF), Indonesia's foreign debt has soared to the staggering figure of Rp1,667 trillion because the government has been accepting loan offers without actually needing the credits.

Economic observer of the University of Indonesia Faisal Basri said Indonesia must able to manage and reduce its external debts in order to reduce its burden. "The government can reduce its debts by expanding its tax-resource bases and be efficient on its expenditure," Faisal Basri said on Monday.

He said that the government had been able to reduce the ratio of its debts against its gross domestic products (GDP) to 32 percent. Indonesia debts swell during the monetary crisis in 1998.

According to minister Mulyani, the debt issue in Indonesia was always seriously discussed by the media, NGOs and the public as a reflection of their disappointment during the New Order Government. In the era of the new order government, debts were not transparently managed. "It was even mentioned that financial leakage during the new order reached 30 percent," she said.

But now, the regime let all the process be transparent. All the budgeting is discussed with the House of Representatives and the government, and is approved in the state budget. Also included in the state budget is the deficit financing, or debts.

She said that in nominal term, the increase in the country's debts whether in the form of rupiah, dollar and yen, had happened as a result of accumulation from the past.

"Our debts highly increased during the 1997-1998 economic crisis. The debt increase in nominal values was further worsened by the sharp depreciation of the rupiah," the minister said.

Indonesia has debts with several main creditors such as Japan, the Asian Development Bank and the World Bank. Even the nominal value of the country's debts continue to increase, its ratio against the country's gross domestic product (GDP) continue to drop.

Indonesia's stand-by loans up to now have reached US$5.5 billion dollars. About US$2 billion of the stand-by loans came from the World Bank, US$1.5 billion from Japan, US$1 billion dollars from Australia and US$1 billion from the Asian Development Bank (ADB).