Debt to GDP ratio reduced by 1% annually

JAKARTA: Indonesia is expected to reduce debt-to-GDP ratio by 1% annually with condition that incoming capital is maintained.Provided that the government keeps the debt, the average gross domestic product must increase by IDR62.5 trillion to reduce the debt ratio by 1% annually, as stated by Minister Secretary of National Development Planning / Secretary of National Development Planning (Bappenas) Syahrial Loethan.The calculation from the ministry is based on the current Indonesia GDP at IDR6,250 trillion. The debt may increase, but GDP will be boosted higher so the debt to GDP ratio may decrease, he said in Jakarta yesterday.According to him, investment is one crucial factor in reducing the debt to GDP ratio. Thus, the government will be more serious in providing infrastructure and enforcing law in Indonesia.Bappenas recorded that the debt to GDP ratio is at 25% and is expected to go below 24% by 2014. The debt to GDP ratio has been declining since 2000, when it reached 88.9%, and last year it was recorded at 26.1%.We think that debt remains needed, as long as it is allocated to finance the sectors profitable for the public, such as infrastructure. At beginning of year, the absorption is not too optimal, Syahrial added.Based on Bisnis data, the real absorption of debt to finance projects, programs, and sub loan agreement (SLA) last year was not more than 77.5% or US$5.5 billion of the total allocated facility at US$7.08 billion.Data from Bappenas shows that the least absorption for project was 66.9%, or US$2.41 billion. On the other hand, the total allocated debt for the sector was US$3.60 billion last year.Samurai bondNot only loan from foreign countries or multilateral institutions, securities is also the source of financing for State Budget.Indonesia is aggressive in using domestic niche market to get IDR124.66 trillion to cover budget defisit this year. One of the government efforts is issuing foreign exchange bond worth US$1.5 billion.However, the government canceled the issuance of yen-denominated bond or samurai bond in Japan market following the downgrade of Japanese credit rating by Standard & Poors.Finance Minister Agus D. W. Martowardojo said that Indonesia could understand S&P's decision, after the rating agency revised credit ratings of Europe and US.The government will offer two series of short-term bonds today, having 3 months and 12 months in tenure. (T04/NOM)