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SBSN plays strategic role in national infrastructure development
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(Courtesy of Finance Ministry)
T
he phrase “infrastructure development” is commonly heard, though some do not understand its meaning and importance for Indonesia.
As an archipelagic country, Indonesia's geographical conditions are a challenge for the government in equalizing development. One way the government manages this is through its policy strategy for sustainable infrastructure development through development connectivity, supporting mobilization and increasing the competitiveness of Indonesian products.
President Joko "Jokowi" Widodo has emphasized that Indonesian products would struggle to compete with other countries if Indonesia's infrastructure is inadequate. Intensive infrastructure development can ultimately improve the country's economy alongside its people's welfare.
In the 2024 State Revenue and Expenditure Budget (APBN), the year's infrastructure-spending budget is set at Rp 422.7 trillion (US$27.1 billion), an increase of 5.8 percent from the 2023 APBN outlook of Rp 399.6 trillion.
The 2024 infrastructure budget is directed at accelerating the development of economic driving infrastructure (connectivity and transportation, energy, electricity and food), prioritizing the provision of basic service infrastructure in the fields of education and health, completing National Strategic Projects (PSN), which were delayed due to the pandemic, accelerating the development and completion of the Nusantara Capital City project gradually and sustainably, as well as equalizing and strengthening access to information and communication technology.
Although the government in general finances infrastructure development, the infrastructure budget has limitations. As fiscal space is still relatively limited, the government must look for other financing alternatives.
In short, the government requires other avenues of financing that are safe, credible and independent, which has been addressed through the issuance of the Government Securities (SBN), including State Sharia Securities (SBSN).
Financing support from the SBN allows the APBN deficit to be maintained, while the debt ratio remains prudent in accordance with applicable regulations. Debt financing is currently dominated by SBN, where, as of the end of August 2023, 89 percent of outstanding debt came from the SBN while the remaining 11 percent came from loans.
The SBN is a very important source of APBN financing, and the issuance of the SBN is also part of the government's efforts to support the development of the domestic financial market, provide liquidity and risk management instruments for financial institutions and provide monetary management instruments for Bank Indonesia.
"SBSN is a form of securities that must have a project, must have assets," explained Deputy Finance Minister Suahasil Nazara.
Suahasil said debt management through SBN and SBSN was also carried out carefully. Debt maturity and the ability to pay, he continued, were the main considerations before debt is realized. In the context of the nation, this is necessary so that the credibility of the budget is maintained.
Apart from serving as the general funding for the APBN, the SBSN is also used directly to finance projects or activities from ministries or institutions, or otherwise earmarked. Government project financing through the SBSN has increased significantly from year to year, both in terms of nominal value and from project initiating units or work units with increasingly varied project types as well project locations that are increasingly spread throughout Indonesia.
From 2013 to 2023, the SBSN has succeeded in supporting the development of 5,163 projects with a total allocation of Rp 209.82 trillion in 38 provinces. The projects, carried out through sharia-based financing instruments, have provided numerous benefits to the communities.
Projects financed through the SBSN include 699 road and bridge infrastructure projects amounting to Rp 73.37 trillion, 749 water resources infrastructure projects amounting to Rp 36.62 trillion, 217 land, sea and air transportation infrastructure projects as well as training programs amounting to Rp 61.01 trillion.
Source: Finance Ministry
