Indonesia Economy - Manageable and sustainable public debt

Transcription

1. Economic Research Manageable and sustainable public debt Public sector debt remains relatively low , thanks to the prudent fiscal rule that caps the general government deficit at 3.0% of GDP a year. In 2015, public sector debt stood at just below 27% of GDP, a far cry from around 95% in 2000. Indonesia’s debt consolidation process over the years had been made possible primarily because of both low interest rates and high real GDP growth rates. The 2.8-percentage point increase in 2015 above the 2010-14 average of 24.0% was due to a larger primary deficit, recapitalisation of state-owned enterprises (SOE), and exchange rate depreciation. To limit the financing risks of a higher-than-targeted deficit in 2015, the government frontloaded bond issuance and borrowing from multilateral donors. It also raised USD3.5 billion to pre-finance its 2016 budget. The latest data show that loans from the World Bank and the Asian Development Bank make up 29.6% and 17.0%, respectively, of the government’s total external loans in 2015. Meanwhile, multilateral loans make up 48.1%, while bilateral loans make up 45.2%. Commercial loans therefore do not figure prominently in the government’s external loans profile. However, it is on a rising trend. In 2015, it made up 6.7% of the government’s total external loans, compared to 3.0% in 2008. The government is depending less on loans. As a percentage of total government debt, the proportion of loans, which are largely external, has fallen from 44.6% in 2008 to 24.1% in 2015. The proportion of government debt securities, on the other hand, has risen from 55.4% in 2008 to 75.7% in 2015. During the same period, the proportion of foreign currency-denominated government debt securities to total government debt securities rose to 26.0% from 13.5%, while that for rupiah-denominated debt securities fell to 74.0% from 86.5%. Non-residents hold about 60% of total government debt. Contingent liabilities appear manageable. Available data suggest that the level is unlikely to pose an immediate threat to debt sustainability. For example, debt guarantees related to the financing of electricity and water infrastructure projects up to March 2014 totalled only 1.5% of GDP. According to the IMF’s projections, fiscal risks associated with government contingent liabilities remain moderate going forward. Chart 3: Government debt components (% total) Chart 4: Government interest payments (% total expenditure) 100 90 80 70 60 50 40 30 20 10 0 13 6 0.12 12 5 0.10 11 4 0.08 External loans (LHS) FC securities (LHS) Rupiah securities (LHS) Domestic loans (RHS) Country Risk Monitor: Indonesia 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 0.06 Source: CEIC, MARC Economic Research Note: FC: foreign currency 5 0.14 10 3 0.04 9 0.02 8 0.00 7 2 1 6 0 2005 2006 2007 2008 2009 2010 Domestic (LHS) 2011 2012 2013 Overseas (RHS) Source: CEIC, MARC Economic Research 2014 2015