Executive Director of the Institute of Development for Economics and Finance (Indef) Enny Sri Hartati assessed that the government needs to increase foreign investor confidence in Indonesia's economic fundamentals. Enny reminded, 40 percent of Indonesia's debt is currently held by foreign investors.
With the deficit in the balance of payments condition, according to Enny, this could further increase investor distrust. "The indicators used by market participants are not only the debt to GDP ratio. But, it is precisely a matter of CAD (current account deficit) and our balance of payments," Enny said when contacted by Republika on Sunday (9/23).
He said that the current condition of government debt was more dominated by the issuance of bonds or Government Securities (SBN). This is different from the debt of the New Order era which is more dominated by loans from donor institutions such as the IMF or the World Bank.
"So what needs to be considered is market confidence especially those that are controlled by foreigners up to 40 percent (ownership of SBN)," said Enny.
According to Enny, with the current government debt position, market distrust can be a risk. One of them is capital outflow or capital outflow.
For information, in the second quarter of 2018, the current account deficit (CAD) reached 8 billion US dollars. Meanwhile, the capital and financial account balance surplus was only 4 billion US dollars.
Thus, Indonesia's overall balance of payments experienced a deficit of 4 billion US dollars. This can then have an impact on ever-decreasing foreign exchange reserves.
Enny said, foreign investors would see Indonesia's ability to pay from foreign exchange reserves. He said, although India's currency depreciated more than the rupiah, it had 390 percent of foreign exchange reserves.
Meanwhile, Indonesia's foreign exchange reserves are only 72 percent of the total debt. "Well, this is why it must be mitigated," said Enny.
Enny advised the government to be able to implement a mature import control policy. In addition, he also asked the government to be more efficient in spending spending one of them by reducing bureaucratic spending.
"Infrastructure spending must also be prioritized and the impact calculated. If the impact is minimal, it must be evaluated especially if there is an increase in imports," he said.