Public Debt Sustainability in Indonesia after Financial Crisis and During COVID-19 Pandemic

The Developing countries are particularly vulnerable to shocks, such as the global financial crisis and the COVID-19 pandemic. The economic crisis increased external public debt to stabilize the economy and improve people's welfare. High external debt puts the debt in an unsustainable condition. This study aims to measure the debt sustainability of external public debt in Indonesia from 2008-2020. We used the Threshold Value of The Debt Sustainability Framework for Low-Income Countries (LIC-DSF) and the Solvency Rate of External Debt (SRED) as a better combination for measuring debt sustainability in Indonesia. The results showed external public debt was at a low-risk threshold after the global financial crisis. However, the impact of COVID-19 has caused the ratio of external public debt interest payment to tax revenue to be within a high-risk threshold value. The SRED value shows a minus number from 2012-2020 caused by the worsening current account balance and net capital account values. The analysis of debt sustainability may be able to encourage a prudent and sustainable the Indonesian budget management policy. © 2023 WITPress. All rights reserved.

Does the Covid-19 pandemic affect the stock market in Indonesia?

This study aimed to analyze the existence and effect of the Covid-19 pandemic on the stock market over the long-term and short-term in Indonesia. The study followed Krugman’s (1979) approach stating the pandemic crisis problems have the potential to decrease the performance of the international balance of payments which will ultimately lead to uncertainty in the market. The research method was the Error Correction Model (ECM) with stock markets as an endogenous variable;and exchange rate, inflation, interest rate, foreign stock markets, commodity price, and pandemic as exogenous variables. The pandemic indicator was measured by total accumulative cases of Covid-19 per day in Indonesia. Using ECM, the result showed that foreign interest rates and commodity prices positively affect the stock markets. Conversely, the exchange rate has a negative effect on the stock markets. However, the estimation fails to reflect the significant impact of the Covid-19 pandemic in the short-term, but it has a negative effect on stock markets in the long-term. This result implies that the higher total accumulative cases of Covid-19 has been the source of Indonesia’s stock market weakness in the long-term. To the best of the author’s knowledge, this study is the first to examine Indonesia’s stock market’s pandemic impact between the short term and long term. © 2020 Universitas Gadjah Mada - Faculty of Social and Political Sciences. All right reserved.