This is the Reason Why Countries Also Borrow

"This is the reason why the country is also in debt."

"Dream - The country is also in debt. Bank Indonesia recorded the External Debt (ULN) in Indonesia in the third quarter of 2023 reaching US$393.7 billion. This amount decreased compared to the end of the second quarter of 2023, which reached US$396.5 billion. The decrease in ULN is mainly sourced from the public sector."

This is the Reason Why Countries Also Borrow

With this development, ULN Indonesia annually experienced a growth contraction of 0.1% (yoy), continuing the contraction in the previous quarter of 1.2% (yoy).

Apart from being able to help the country's economy, debt can also become a nightmare for a country if it is at risk of defaulting on its debt. Like the United States, which is at risk of defaulting on its debt of US$31.45 trillion as of March 2023. This total debt also puts the US as the country with the highest debt in the world. So why do countries around the world borrow? Here are 4 reasons why countries need to borrow:

"Maintaining Momentum and Avoiding Opportunity Loss"

According to the website djppr.kemenkeu.go.id, the need for unavoidable expenses such as healthcare facilities and food resilience has led the country to incur debt. Delaying financing will result in even greater costs or losses in the future.

The current development financing opportunities are optimized to close the infrastructure gap and improve Indonesia's Human Development Index (HDI), which is still relatively lagging behind other countries. The improvement of HDI can be achieved, among others, through the enhancement of the education, health, and social protection sectors.

"Providing a Good Legacy (Heritage) Asset for the Next Generation"

Good legacy arises when debt is used to finance productive things and provide benefits for future generations, such as infrastructure and education spending. Financing spending needs through debt is an investment that can fulfill intergenerational justice by bequeathing assets to future generations (Golden rule).

"Maintaining and Accelerating Economic Growth"

With the debt policy, the Indonesian economy is able to grow at the current level. The Fiscal Policy Agency study states that if the debt ratio to GDP is maintained at 23 percent, then the average economic growth for 2013-2016 will be below 5 percent.

Preserving the html tags, the translated text would be: "Maintaining the debt-to-GDP ratio at 23 percent means eliminating the opportunity to create jobs for 150-200 thousand people between 2013-2016."

"Developing Financial Markets"

The Government debt instruments traded in the financial market are used as a benchmark for the financial industry. The issuance of government debt instruments is an investment alternative offered to the public. The monetary operations carried out by Bank Indonesia are also supported through the issuance of Government debt instruments.

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