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Indonesia: Government debt could face up to 35% rupiah depreciation
The proposed 2019 state budget is designed to face a worst-case scenario of rupiah depreciation of up to 35 percent — Rp 18,000 per US dollar –, particularly related to anticipated ballooning government debt due to the rupiah weakening.
Finance Ministry Budgetary Director General Askolani said the shock estimation was a stress test that could be used by the government to test the debt ratio under the worst conditions.
“It means if the worst occurs, we are prepared,” said Askolani as reported by kontan.co.id on Thursday.
He said if the rupiah weakened to Rp 18,000 per US dollar, government debt would still be controllable. This year’s average rupiah exchange rate is projected at Rp 13,973 per US dollar.
The government believes debt to gross domestic product (GDP) will be between 29.5 and 31 percent, with a possible increase of 5 percent.
The government considers a debt to GDP ratio lower than 40 percent safe, considering Malaysia debt to GDP ratio had reached 65 percent.
The government also estimates that debt installment payments to the GDP ratio will be 1.5 to 2 percent in the period between 2019 and 2022. Meanwhile, debt payment to debt outstanding ratio is estimated at 5.5 to 6.5 percent.
Meanwhile, Bank Indonesia deputy governor Dody Budi Waluyo said the possibility of the rupiah depreciating by 35 percent was very small, considering that the rupiah’s depreciation from January to date reached only 7 percent. (bbn)
Source: http://www.thejakartapost.com/news/2018/08/23/government-debt-could-face-up-to-35-rupiah-depreciation.html