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Jakarta Post

Is Indonesia managing foreign debt prudently?

  • Ardhienus


Jakarta   /   Wed, January 8, 2020   /  10:15 am
Is Indonesia managing foreign debt prudently? Smooth ride: An MRT train pulls into ASEAN Station in South Jakarta on April 1, 2019. The long-awaited public railway network is among the infrastructure projects developed with foreign debt. (JP/Dhoni Setiawan)

To finance the economy, Indonesia has been experiencing a shortage of funds. The classic problem is that the balance of domestic savings is never enough to meet development financing needs. So the debt is needed to plug the deficit. But the problem is domestic debt is apparently still lacking. Therefore, foreign debt becomes an option. Moreover, the cost of external debt is sometimes cheaper than debt to domestic creditors. External debt has two sides of a coin. In addition to providing benefits, external debt also has adverse effects, especially if external debt withdrawals are uncontrolled or excessive and their management is not prudent. Many examples of countries exposed to severe crises caused by heavy external debt burdens include Greece and Argentina. Our country experienced it during the Asian financial crisis in 1997 and 1998. Lately, attention to our external debt has ...

Disclaimer: The opinions expressed in this article are those of the author and do not reflect the official stance of The Jakarta Post.