( NGO in Special Consultative Status with the Economic and Social Council of the United

Nations, Ref. No : D1035 )

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INFID’s Statement

ADB’s Statement on Indonesia’s Debt Issue

is Misleading and Replete with Vested Interests

Today, on August 10th, 2010 ADB together with ILO and IDB has released the Country Diagnostics
Studies report entitled Indonesia: Critical Development Constraints. The document establishes the
sources of Indonesia’s economic barriers and their probable solutions. Amid the launching of the
report, Edimon Ginting, ADB’s economist pointed out that Indonesia need not be alarmed of its
foreign debt burden which has now reached Rp 1,625 trillion as its ratio further decreases in
comparison to the country’s GDP currently at Rp 6,253.79 trillion. (DJPU, Finance Ministry of the
Republic of Indonesia, July 2010).

INFID emphasizes on the need to adopt a discerning stance towards ADB’s statement on
Indonesia’s foreign debt position. The statement on Indonesia’s debt ratio against GDP is indeed
misleading. It should be noted that despite Indonesia’s high GDP, it is not entirely under the
government’s ownership. GDP calculation in Indonesia still includes foreign ownership and wealth
in the country. In reality, Indonesia’s total debt which continues to experience an upward trend in
nominal terms has imposed a heavy burden on the national budget each year. In the forthcoming
five years, at least Rp 100 trillion must be set aside each year for debt service payment. The national
budget, in the next five years, should instead concentrate on financing efforts to accelerate the
achievement of MDGs which to this day continues to proceed at a snail’s pace.
INFID is of the opinion that ADB’s statement is both deceiving and replete with vested interests. As
a regional financial institution and one of the largest creditors for Indonesia, it is undoubtedly in the
best interest of ADB to ensure that Indonesia continues to be in debt, thus allowing the institution to
constantly register prodigious gains.

It should be kept in mind that following the economic crisis in 2008, ADB suffered from funding
difficulties as a significant portion of its funds are derived from the crisis-hit capital market. With
the intention to amass funds, in its annual meeting held in Bali in May 2009, ADB urged its
members to inject additional capital which among others was agreed to by Indonesia. In addition to
the capital market, ADB’s funding sources are also drawn from interest payments made by its
debtor countries including Indonesia. To this day, Indonesia remains to be ADB’s largest debtor. As
a middle income country, Indonesia is no longer entitled to receive the low-interest ADF (Asian
Development Fund) category of ADB’s loans, but can only obtain loans with commercial interest
rates known as OCR (Ordinary Capital Resources).

ADB’s statement which asserts that Indonesia’s debt position is at a safe level is also highly
contradictory with President Susilo Bambang Yudhoyono’s earlier appeal that called for the country
to reduce its dependence on foreign debt, as delivered during the limited cabinet meeting on the
economy held on 19 July 2010. INFID, therefore urges all government ranks to pay more serious
attention in decreasing the country’s reliance and inclination towards foreign debt. INFID also
demands that ADB ceases from interfering with Indonesia’s economic sovereignty by inveigling the
country with new loans.

Jakarta, 10 August 2010

Sincerely,

Wahyu Susilo
INFID Program Manager
(wahyu@infid.org, 0815 1039 2859)

Contact Person: Nikmah (nikmah@infid.org) 085881305213