Developing Countries in Asia Threatened by Economic Crisis Due to This

The United Nations (UN) warned developing countries in Asia about the economic crisis that could occur due to debt. This crisis could be even worse than the crisis during the Covid-19 pandemic in 2020.

According to the United Nations Conference on Trade and Development (UNCTAD), the crisis (in Asia) could be even more dangerous than the 2008 crisis.

UNCTAD in its 2022 Trade and Development Report, Wednesday (5/10/2022), explained, “All regions will be affected, but the alarm bell is most often ringing for developing countries, many of which are close to debt default.”

Secretary General of UNCTAD, Rebeca Grynspan, predicts developing countries in Asia are heading towards an economic recession. Moreover, if the policies of developed countries actually lead to an increase in interest rates.

“We still have time to pull back from the edge of a recession. Nothing is inevitable. We have to change course,” Grynspan said.

An example of an Asian country experiencing a debt crisis in Sri Lanka. They have sunk deeper into the debt crisis. The IMF announced a US$2.9 billion aid package for Sri Lanka.

Then, what about Indonesia? The Ministry of Finance (Kemenkeu) reported that the government’s debt until the end of August 2022 was IDR 7,236.61 trillion. Higher than last month’s debt position of Rp 7,163.12 trillion or an increase of Rp 73.49 trillion.

“The government’s debt position is at Rp. 7,236.61 trillion,” wrote the book on APBN Kita, which was released by the Ministry of Finance, Thursday (29/9/2022).

The debt-to-Gross Domestic Product (GDP) ratio is also even higher than in the previous position. The Ministry of Finance noted that there was an increase from 37.91% to 38.30%.

“Although there is an increase in the nominal and debt ratio at the end of August 2022, the increase is still within safe, reasonable, and controlled limits accompanied by optimal portfolio diversification,” explained the Ministry of Finance.

In fact, Finance Minister Sri Mulyani Indrawati has emphasized the government’s commitment to normalizing the fiscal deficit back to a range below 3% by 2023.

To return the deficit to its normal post-pandemic range, the government will carry out fiscal consolidation. This is marked by efforts to put a brake on debt issuance.

Sri Mulyani revealed that the realization of debt financing until August 31, 2022, reached Rp. 331.2 trillion, down 40.1% when compared to the same period in 2021 which amounted to Rp. 552.6 trillion.

According to data from the Ministry of Finance, debt financing until August 31, 2022, consists of SBN (net) of Rp. 317.3 trillion, down 44.1% when compared to the realization of the same period in 2021 which amounted to Rp. 567.4 trillion. Meanwhile, net loans have been realized at Rp 13.8 trillion, down 193.3% compared to the realization on August 31, 2021, which amounted to Rp 14.8 trillion.