The weakening of the rupiah exchange rate has caused the government's debt burden this year to soar. The cause of the increase comes from two directions. First, the difference from the assumption of the exchange rate of the US dollar against the rupiah set in the State Budget and Expenditure at an average rate throughout the year. Secondly, the increasing interest of new debt securities issued by the government.
The difference between the assumptions of the exchange rate and the average exchange rate has now reached Rp 582.32. The State Budget states the assumption of a US dollar exchange rate of Rp. 13,400. While the Jakarta Interbank Spot Dollar Rate of Bank Indonesia rate, if averaged since the beginning of the year to September 10, has reached Rp. 13,982.32.
The government must also offer more attractive interest for the new debt letter so investors are interested in the rise of Indonesia's credit default swap (CDS). "The yield of state treasury bills (SPN) is now increasing, the cost of paying debt is high. Interest rates are relatively expensive, we now have to be careful," Finance Minister Sri Mulyani Indrawati said on Monday (10/9).
Various negative sentiments surrounding emerging markets, including Indonesia, have hoisted perceptions of investment risks. This perception is reflected in CDS. Citing Bloomberg, CDS Indonesia data with a period of 5 years, earlier this week was 148.48. Even though last week, the CDS figure was still moving at 143.67.
The CDS movement was in line with the increase in SPN interest. Sri Mulyani said that the SPN for 3 months traded at 5.29% as of September 10 2018. That number rose from the previous average of 4.7%. Referring to the trend, Sri Mulyani predicted, the 3-month SPN yield in the next auction would move in the range of 5.4% -5.7%.
Government debt as of the end of July 2018 according to the Ministry of Finance's record (Ministry of Finance) reached Rp 4,253.02 trillion, grew 12.51% compared to the previous year. Of that amount, as much as Rp 1,804.42 trillion or 42.42% is foreign currency debt which is mostly denominated in US dollars.
Of the total government debt, this year's maturity reached Rp 395.97 trillion. Of the total due, debt in US dollars reaches Rp 113.06 trillion, if using the exchange rate of Rp 13,400 per US dollar.