Debt is Not Always Bad


Debt is an amount of money one borrows and has to pay back later. Many people think that if Indonesia has debts with other countries it is a very negative action. However, do you know that having foreign debt has several benefits?

In theory, according to Supriyanto and Sampurna AF (1999), foreign aid actually produces a positive multiplier effect on economy. In the short term, foreign loans can cover the state budget deficit. This is much better than allowing the state budget deficit to be possible government for development.

Thus, the government can carry out fiscal expansion to increase the rate of national economic growth. Increasing the rate of economic growth means increasing national income, which in turn allows for increased per capita income. Besides that, good impacts on a country’s economy are:

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1. Infrastructure development for developing countries

In developing countries, the state needs various developments for facilities and infrastructure for all its people. As the right policy, a shortcut and the fastest way for a country to quickly develop its country is to borrow funds from neighboring countries which do have sufficient funds.

2. Covering budget shortfalls

The function of the state debt can be to cover budget shortfalls such as cash, can be short-term cash in spending that cannot be postponed, a solution to reduce the burden of spending to finance debt in the next year’s state budget.

Then there are also those who say that this state debt can solve problems without creating new problems, of course, if it is managed properly by the person concerned.

3. Establish bilateral relations

Foreign debt can help cement the relationship between the two countries. Indonesia, which has debts with other countries or with international financial institutions, can establish bilateral and multilateral relations between Indonesia and other countries so that they can have better relations.

This condition is good, because in this modern era every country certainly depends on other countries to advance the welfare of  people.

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So in essence, debt with other countries is not always negative, but has benefits for the countries involved (Safina, 2022).

Penulis: Dinara Safina
Mahasiswa Hubungan Internasional UMY

Editor: Ika Ayuni Lestari

Bahasa: Rahmat Al Kafi

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