INDONESIAN DEBT MANAGEMENT

The problems that often arise in the implementation of economic development in a country, especially developing countries is the limited availability of capital. It is also felt by Indonesia, which is reflected in the state budget deficit during the process of economic development of the country. As a developing country, Indonesia is also expected to accelerate the process of economic infrastructure development is very high enough to swallow the state spending that is not able to be accommodated by the state revenue alone. However, to finance the needs of the economy, the government is taking steps to make loans both foreign and domestic. Foreign debt policy by the government also received opposition from various parties. Economists agree that the policy would argue that foreign debt has great benefits for a country's development, particularly for developing countries, where the state capital has limitations in implementing development programs. While economists disagree on foreign debt policy assume that the foreign debt at the beginning may increase capital requirements for development, but if this policy continues to do so will make the country's economy becomes fragile because of the heavy debt burden. Debt is the main objective is to support economic development and growth will be the government's burden when making the debt payments. Payment of principal and interest repayments of foreign debt affects the economy because in certain circumstances the mortgage payments can have an impact on the economy, eliminating the positive contribution of foreign debt.

After the economic crisis of 1998 the amount of foreign loans increased sharply in the amount of U.S. $ 133,073.00 in 2000, while in 1998 and 1999 the number of Indonesia's foreign debt was U.S. $ 20,567.00 and U.S. $ 110,934.00. The increasing amount of foreign loans was due to the government seeks to stabilize the exchange rate against foreign currencies so that it requires a very large foreign exchange reserves, while Indonesia's foreign exchange reserves at the time it was drained in the face of public panic that rollicking buy dollars with the assumption that the dollar will rise. Foreign debt burden continues to swell as if in line with loan repayment and interest is so great. Currently foreign debt has become a major source to cover the budget deficit and contribute significantly to economic growth in Indonesia is reflected in the Gross Domestic Product (GDP). The increase in GDP is also related to macroeconomic issues where the main variables are inflation, interest rates, exchange rates and the money supply. People are reluctant to move to produce a good or service when high inflation. They will assume that they are offering a product that would later have a high selling prices and low consumer purchasing power in these conditions so it will be difficult to make a profit. The tendency of people not to produce it will directly affect the amount of the gross domestic product in which the amount should remain intact high to sustain the economy of developing countries. The interest rate that is too high will lead to more people choosing to save their money in banks rather than having to turn the money in a high-risk economic activity. But on the loan, customers will tend to re-think to do credit to the banking saw interest rates are too high. As an institution that regulates the monetary system in Indonesia, Bank Indonesia has set the BI rate of 7.5% which increased 25 basis points from the previous 7.25%. This increase is intended to control the current account deficit and inflationary pressures and weakening of the rupiah. Although economic observers objected if the BI rate rise again, because it is considered to hamper economic growth and impact on the various sectors of the economy. Analysts say the government needs to do now is to fix the real sector through policy packages that have been issued to begin immediately so that businesses can get up and drive economic growth.

The economic turmoil is also influenced by the weakening of the exchange rate, it reflects declining public demand for the rupiah because of the declining role of the national economy or because of increased demand for foreign currency as a means of international payment. The cause of the weakening of the exchange rate is dominated by external factors even though there is little contribution from the internal. External factors derived from market response measures are concerned about the Federal Reserve governor, Bernanke cut the stimulus that causes the flow of capital into the United States and in various countries stock market crashed. Internally an increase in the current account deficit in the second quarter from $ 5.8 billion to gross domestic product to $ 9.8 billion by the market responded negatively to impact on the weakening of the rupiah. Impact it will have one of them is the import-export sector where the cost of imported raw materials will increase so will trigger a rise in inflation in the country. However, on the export side, the craftsmen expect conditions like this because they will get excess profit. The impact of the weakening of the rupiah is felt in the real sector due to lifestyle factors Indonesian people who love to consume imported goods rather than produce their own goods to be sold domestically and abroad.

Management of the money supply in the hands of the public is also very sensitive to economic performance. Measures taken to increase the money supply is expected to increase the purchasing power of people, but if excess will decrease the value of the currency because people assume that money can be obtained easily. The steps taken by the government solely aims to achieve stable economic growth so as to prosper his people. Foreign debt policy is trusted by governments to stimulate economic growth due to the influx of capital that obtained from abroad may increase investment to support economic growth. Foreign debt is also very useful when used to create jobs and investment in development that could ultimately drive the economy to a better direction. Although external debt can increase the supply of domestic capital that is also used as financing the state budget deficit, but keep in mind also that foreign debt poses an obligation to repay it at maturity. 
As an attempt to cope with the budget deficit, the government can optimize natural resources owned by the state for self managed or domestic companies, foreign companies do not release it, and his fortune will fall into foreign hands. The government should also be serious about budget leaks in corruption by the many irresponsible. Presidential election expected to bring the spirit of change in Indonesia next 5 years, the nation's leader is expected to seriously address the issue of corruption, so that the budget will be channeled to sectors that require such education, health, and infrastructure.