Written by Febri Ardianto, an aviation student, GNFI contributor in Surabaya

Lately we’ve been disturbed by the news of how big Indonesia’s debt is. The numbers actually are really shocking. It is 1,667 trillion Rupiahs (around 163 billion US Dollars with the latest currency exchange rate). Many people put the blame on our government. Let’s try to think outside the box. In order to do so, you have to know what is GDP (Gross Domestic Product). According to Wikipedia, GDP is a basic measure of an economy’s economic performance, is the  market value of all final goods and services produced within the borders of a nation in a  year. In the other hand, GDP is a nation’s income.

As a developing country, definitely, Indonesia has debt. So, which country in this  world do you think doesn’t have debt at all? In your mind, those must be USA or Japan, the first and second largest economic power in the world. So lets go through USA first.

If you made an easy search on Wikipedia, you will find the fact that even USA has debt! As of 2007, the debt of the United States ranked as the 22nd-largest in the world as a percentage of GDP. In 2007, USA came with a total debt of 65.5% of GDP. As per May 7, 2009, the total USA federal debt was 11 trillion US dollars. It is 80.1% of GDP based on current GDP. In an easy way, it’s like you have an income of 1,000,000 US dollars a year, but you have a debt 801,000 US dollars. What a shocking figures! Moreover the US government estimates that the total debt relative to GDP will rise to 97% by 2010 and stabilize at approximately 100% thereafter.

Now, let’s take a look at Japan. This time, lets make it more simple. According to  OECD (Organization for Economic Cooperation and Development) data, during the year of 2007, Japan has debt with a ratio of 180% of GDP. Within 2008, aggregate debt was 259% of GDP. Wow! It’s like you have an income of 1,000,000 US dollars, but the sad part is, you have a debt of 2,590,000 US dollars!

For me personally, this is a really shocking fact. That no one of us knew that before. It’s a gloom behind a bright.

Prepare yourself to know the fact about Indonesia. As we all know, Indonesia has paid all the debt from IMF in 2006, despite the fact that Indonesia could have paid in installments up until 2010. This is 4 years earlier, that made Indonesia can save 500,000 dollars. Since the reformation, Indonesia’s debt ratio to GDP keeps on decreasing. During 2000, the debt was 80% of GDP; in 2004 it was 54.6%. For 2005 it was 46.8%. In the year of 2006 it was 37,5%. And finally it was 34,7% of GDP in 2008. It’s like if you have income of 1,000,000 US dollars a year, you only have debt in amount of 347,000 US dollars. Such an interesting thing, isn’t it?

So in your opinion, which one of those country has the biggest chance to pay all of  its debt?

The economic ministry of Indonesia estimated that nowadays debt is around 32% of GDP.  And also, they said that the nation’s foreign exchange reserves is 51.06 billion US dollars.  That means if Indonesia were to go bankrupt today, this country could still pay for all the imported product and pay off all the foreign installment debt up to 4.7 months to come.

Picture taken from here.