The Minister of Finance, Sri Mulyani, reminded the government and private companies to be aware of the spike in debt interest. This must be considered due to unpredictable global conditions such as monetary policy changes and tightening liquidity in many countries.
Several developing countries were affected by the United States (US) policy changes. The US chooses to increase its benchmark interest rate in response to the inflation spike and its impact on global financial markets.
Many countries have also raised their benchmark interest rates. On the other hand, several countries are also experiencing an inflation spike due to supply chain problems and surging commodity prices.
“Some developing countries such as Mexico, Brazil, and South Africa raised their benchmark interest rates significantly to deal with domestic inflation as well as to anticipate spillovers from tightening monetary policy and global liquidity. we should be aware of debt interest,” Sri Mulyani said while attending the DPR Plenary Meeting, Friday (20/5). 2022)
“We have to be aware of debt interest, especially the implications of the rising cost of funds for financing both the APBN and for the private corporate sector, also for BUMN. This has the potential to threaten Indonesia’s economic recovery, which is still in its early stages and is quite fragile,” She explained.
Since March 2022, the yield of government securities (SBN) has increased in response to global conditions. Fortunately, state revenues are quite good due to the surge in international commodity prices, thus encouraging additional tax payments, non-tax state revenues (PNBP), and export duties.
The government also still has a large budget reserve from the previous year and cooperates with Bank Indonesia (BI) to supply funds if the government needs them.
Previously, the signal from Bank Indonesia (BI) to raise the benchmark interest rate or BI 7-day reverse repo rate was getting stronger. Moreover, the Central Statistics Agency (BPS) has just reported a spike in inflation in April 2022.
Inflation in April 2022 was recorded at 0.95% (mtm) or 3.47% (YoY). The volatile food component (VF) was the main contributor to April inflation with a share of 0.39% and inflation of 2.30% (mtm) was driven by the increase in prices al. cooking oil, purebred chicken, and purebred chicken eggs.
The government-regulated price inflation component (administered prices) experienced inflation of 1.83% (mtm), and 4.83% (YoY) due to an increase in Pertamax gasoline and air transportation fares. Meanwhile, core inflation was recorded at 0.36% (mtm) or 2.60% (YoY).
Bank BCA economist David Sumual explained that the increase in the benchmark interest rate from the current level of 3.5% will provide an anchor for inflation so it doesn’t run wild. The high global uncertainty allows high inflation to continue after Lebaran.
On the other hand, an increase in the benchmark interest rate will attract investors in placing their funds. It is known that an increase in the US benchmark interest rate will encourage an increase in yields on US government bonds, thereby attracting capital from developing countries such as Indonesia.