The financial loan will enable Indonesia to lower its fiscal risks as the government expects a budget deficit of 6.34 percent in 2020.
“It's providing us with the room to maneuver, as well as diversifying our risk so we are able not only to cope with Covid-19, helping people, business and Indonesian SMEs but can also maintain the safety and sustainability of our fiscal stance,” said Sri Mulyani.
The Australian government has given Indonesia 15 years to repay the AUD $1.5 billion.
Sri Mulyani said that the loan supports the Asian Development Bank-led Covid-19 Active Response and Expenditure Support Program.
“The loan builds on our highly valued economic relationship and a strong record of bilateral cooperation. Australia and Indonesia are neighbors, friends, and Comprehensive Strategic Partners, and we are committed to supporting one another through this crisis.”
Criticisms pouring in
The decision to take out international loans under the Joko Widodo administration in handling the coronavirus pandemic has drawn immense criticism due to its immense scale.
Former Indonesian Finance Minister Rizal Ramli criticized the government deeming it reckless as the number of foreign loans continues to add up.
“Bond issuance is becoming more expensive because of the interest rate. The government must take out a loan to pay the interest rate alone. It’s getting worse.”
Rizal, who was a former Coordinating Minister of Maritime Affairs during the Joko Widodo administration, added how the country is piling its financial debt from bilateral agreements on top of existing debt obligations.
“That is why you need to change strategies from 'beggars of bilateral loans' of one country to another country.”
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