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Indonesia owes $17.28 billion ‘hidden debt’ to China: Study
The figure is more than four times the country’s reported sovereign debt to China.
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President Joko “Jokowi” Widodo (left) shakes hands with Chinese President Xi Jinping (right) during the G20 Summit in Osaka, Japan, in June 2019. (Presidential Palace Press Bureau/Laily Rachev)
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ndonesia owes US$17.28 billion in “hidden debt” to China, more than four times its $3.90 billion in reported sovereign debt, a recent study has found, suggesting a gross underreporting of the country’s liabilities to the Asian economic powerhouse.
The study, conducted by AidData, an international development research lab based at the College of William & Mary in the United States, notes that rather than being contracted with or formally guaranteed by the central government, the hidden debt has been issued to state-owned enterprises (SOEs), largely to fund projects under the Belt and Road Initiative (BRI).
The debts do not appear on the government’s balance sheet, but if the borrowing companies default or go bankrupt, the government will likely face pressure to bail them out, warns AidData.
"When finance ministries disclose their repayment obligations, they often disclose only their known repayment obligations, rather than disclosing their known and potential repayment obligations. This is the nub of the problem,” said AidData executive director Bradley Parks in an email sent to The Jakarta Post on Wednesday.
Indonesia’s hidden public debt hovered around $362 million from 2000 to 2014 but skyrocketed to around $3.9 billion in 2015, a year after the country joined the BRI, and stayed at that level until 2017. This period was when President Joko "Jokowi" Widodo began pushing for national infrastructure development.
AidData compared its findings to Indonesia's sovereign debt to China as reported to the World Bank's Debtor Reporting System (DRS). By the researchers’ measure, the debt was underreported by an average of $488 million yearly from 2000 to 2014 and by $3.9 billion yearly from 2015 to 2017 – when Indonesia embraced the BRI.
“This underreporting problem is getting worse, not better, over time,” Parks said.
