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Most government foreign debt being spent on civil service, not infrastructure

Kumparan Bisnis - April 3, 2018

Political observer Faisal Basri has criticised the use of state foreign debt which according to the government narrative is being used to spur infrastructure development.

Yet according to the data he has gathered, most of the government's foreign debt is being spent on the civil service.

According to his data, the projected spending on the civil service for 2018 is as much as 366 trillion rupiah or an increase of 28 percent since 2014.

In second place meanwhile is spending on goods at 340 trillion rupiah or an increase of 58 percent since 2014.

Infrastructure meanwhile, which is included in the category of capital, is in third place standing at 204 trillion rupiah or a 36 percent increase since 2014.

"Most of the infrastructure is being funded by BUMN [state-owned enterprise] debt, which is not included the category of projected debt", he said at the University of Indonesia (UIP) campus in Salemba, Jakarta, on Tuesday April 3.

Large projects, according to Basri, are mostly being carried out by assigning them to BUMNs. A small number are being financed by State Capital Participation Schemes (PMN) and the BUMNs are being instructed to finance the remainder with their own funds.

"A number of BUMNs are scrambling to pay for central government projects with their own funds and as a result of cash flow problems, are issuing obligations and seeking commercial loans from banks. Furthermore, the BUMNs are using various means to put pressure on other parties", he said.

Meanwhile capital spending for social assistance has instead declined by 44 percent since 2014. Projected expenditure for this sector for 2018 stands at 81 trillion rupiah. "We are the country with the worst social safety [spending] in the Asia Pacific", he said.

Bank Indonesia data up until late January 2018 shows that Indonesia's foreign debt has increased by 10.3 percent (year on year) to US$357.5 billion or around 4,915 trillion rupiah (at Rp 13,750 to the dollar).

Of this 2,521 trillion rupiah is government debt and 2,394 trillion rupiah is private sector debt.

[Translated by James Balowski for the Indoleft News Service. The original title of the article was Faisal Basri: RI Utang Banyak Bukan untuk Infrastruktur.]

Source: https://kumparan.com/@kumparanbisnis/faisal-basri-ri-utang-banyak-bukan-untuk-infrastruktur.

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