Gov`t Raises Multilateral Loan to Rp34.6tn

TEMPO.CO, Jakarta - The Indonesian government will increase the amount of multilateral debts to Rp34.6 trillion in 2016, in an effort to patch up budget deficits.

Robert Pakpahan, director of finance and risk management at the Finance Ministry, said the amount of debt will be raised five times from this year's Rp7.5 trillion to Rp34.6 trillion next year.

The 500 percent increase, Robert said, is done because the cost of debt to multilateral institutions is cheaper than issuing bonds or Government Securities (SBN).

Robert said that the loan would not bind the government to any institute or country as feared by many parties. "We are sure there will be no dictating," he said.

According to Robert, the additional debt will not harm the economy because Indonesia's debt-to-GDP is still within the safe zone.

Until the end of June, 2015, the debt-to-GDP ratio stood at 24.7 percent. Next year's ratio is projected to be around 25 percent.

Lana Soelistianingsih, an economist with the University of Indonesia (UI), said that although cheaper multilateral loans have plenty of requirements. Some institutions, for example, only lend money to finance projects that interest them. "So, [the loan] cannot be used at will," said Lana.

However she said it is better for the government to borrow from multilateral institutions rather than issuing government bonds, as the current economic slowdown is likely to keep pushing up yield rates.

TRI ARTINING PUTRI