The Webinar Series is an online seminar event organized by the Sharia Financial Management Program (MKS), the Faculty of Islamic Economics and Business (FEBI) UIN Sunan Kalijaga, leveraging advancements in digital technology. The first phase of the Webinar Series was conducted in three discussion sessions. As an introduction, Series 01 of the MKS Program FEBI raised the theme “Assessing the Nation’s Financial Resilience in the Face of COVID-19.” This topic is a response to the Indonesian government’s policy of issuing a stimulus package worth 405 trillion Rupiah, followed by the issuance of a Global Bond of significant value, marking the largest sovereign debt issuance in Indonesia's history. In particular, this event was held via the Zoom Webinar application, which has been subscribed to in order to foster an academic atmosphere, particularly for scientific discussions, amidst the COVID-19 pandemic. Webinar Series 01 was conducted on Wednesday, April 8, 2020, for one hour (10:00-11:00 WIB), including an interactive Q&A session between participants and the speaker.

 

The event was opened by the Dean of FEBI, emphasizing that despite the challenging and concerning times we are in, we must continue to foster a spirit of learning utilizing various media, such as the Zoom Webinar, which we are developing starting today. He appreciated the efforts of the team in organizing the Webinar Series as a platform for exchanging information and enhancing literacy among students. Webinar Series 01 was moderated by Mr. Abdul Qoyum, a lecturer in the Sharia Financial Management Program UIN Sunan Kalijaga, an expert in Islamic finance. Meanwhile, the speaker at Webinar Series 01 was Mr. Bhima Yudistira, an economist from the Institute for Development of Economics and Finance (INDEF).

 

The key discussion points of Webinar Series 01 revolved around the global spread of COVID-19. The widespread outbreak has caused two major crises: a health crisis and an economic crisis. In the health sector, Indonesia has only been able to conduct 36 rapid tests per 1 million people, placing it among the four countries with the lowest COVID-19 testing rates. In the economic sector, the crisis began in December 2019 with the onset of the US-China trade war. During this period, oil prices dropped below the price of bottled water. In January 2020, the government issued a revised State Budget (APBN) through Government Regulation in Lieu of Law (Perpu) No. 1 of 2020. After enacting this revised budget, the Indonesian government expressed optimism in facing the ongoing trade war. Without this revision, the tax ratio would have dropped from 9% to 7% due to the impact of COVID-19.

 

In addition to the trade war, the global economic recession is another consequence of COVID-19. However, even without COVID-19, a global recession was predicted by the International Monetary Fund (IMF), which forecasted a weakening exchange rate and the closure of several factories. After the outbreak of COVID-19 in Indonesia, the government widened the budget deficit from 3% to 5.7% and increased debt to Rp1,000 trillion, three times the amount from the previous year. One issue that needs revisiting is the reliance on debt as the primary source of financing.

 

So, how can the government raise Rp1,000 trillion without incurring debt? In this regard, the Ministry of Finance plans to use the endowment fund for education managed by LPDP, which currently amounts to Rp60 trillion. Additionally, the government can reallocate funds from existing budgets or cut state expenditures. First, state expenditures could be reduced by 20% by prioritizing the most urgent needs. Cutting the State Budget (APBN) could yield around Rp331 trillion, and similar cuts could be made to regional budgets (APBD). Furthermore, the government could propose reallocating funds from infrastructure projects, such as the new capital city relocation, and the special autonomy funds for the Special Region of Yogyakarta (DIY), redirecting these funds to assist communities directly managed by the DIY regional government.

 

Several proposals have been overlooked by the government. First, the proposal to cut flagship projects. Second, the proposal to relocate the new capital city. This proposal is not yet included in the 2020 State Budget, but Rp5 billion has been allocated for design and planning. Third, the proposal to review or even cut religious holiday allowances (THR) and salaries for ministers and officials, though salaries for civil servants in categories I, II, and III should not be cut as they rely on these funds to meet their needs. Through these solutions, Indonesia could secure Rp1,000 trillion without incurring debt. Relying on foreign creditors, such as the IMF, could lead to implications similar to those experienced by Greece and Argentina, whose economic structures did not improve after receiving IMF assistance. To date, there is no success story of a country being bailed out by the IMF.

 

Several issues related to Indonesia’s economic conditions were discussed. First, Government Regulation in Lieu of Law No. 1 of 2020 allows the government to use funds from Public Service Agencies (BLU) without prior authorization. These BLU funds were reallocated to address the COVID-19 pandemic, while additional budgetary allocations were diverted to support students. Second, concerns have been raised regarding Bank Indonesia's function in issuing government securities (SBN) and repurchasing them. Third, there are apprehensions about the potential for budgetary leakages in the utilization of Global Bond funds if these allocations are not managed appropriately. The budgetary cuts outlined in the Government Regulation in Lieu of Law reveal a 94% reduction in the Ministry of Research and Technology's budget, while the Ministry of Education and Culture's budget was increased by 96%. This is paradoxical considering the critical role of institutions like LIPI and the Ministry of Research and Technology in conducting research, particularly in the development of vaccines and other COVID-19 countermeasures.

 

Unexpectedly, participants of Webinar Series 01 demonstrated a high level of enthusiasm, as evidenced by the numerous questions submitted. The following is an elaboration on some of the questions posed by the participants, along with the corresponding responses from the speakers, which we have successfully recorded.

 

Question: Which countries can serve as models for recovery post-COVID-19?  

● Countries such as Singapore, Malaysia, Germany, and Saudi Arabia, which have implemented effective stimulus measures during the COVID-19 pandemic, are worthy of emulation. In Malaysia, the government provided free internet access to its citizens with a budget of Rp2.2 trillion and distributed essential goods and other necessities. Additionally, the United States provided direct cash assistance to its citizens as a stimulus measure.

 

Question: Which is more cost-effective: a lockdown or the current Large-Scale Social Restrictions (PSBB)?  

● In reality, a lockdown is more costly as the government must ensure the provision of livestock and basic necessities for the people. However, given the current situation where the government has already spent approximately Rp405 trillion but has yet to fully meet these needs despite implementing PSBB, it can be argued that a lockdown would have been more cost-effective. In my view, the current PSBB policy has not been effective and seems to be a waste of money as it has not specifically addressed the basic needs of the people.

 

 

Question: What are the roles of the private sector in addressing COVID-19?  

● For instance, students should maintain solidarity among themselves, be friendly, and get along well with others, such as neighbors at home or around their boarding houses. They could establish community kitchens as a way to maintain a sense of family in the community. Additionally, the private sector is expected to refrain from laying off their employees.

 

Question: The day before this event, on Tuesday, April 7, 2020, the Indonesian government issued 3 series of Global Bonds with a total value of USD 4.3 billion, one of which has a 50-year tenor with a 4.5% yield. What is the impact of these Global Bonds on addressing COVID-19 in Indonesia?  

● Global Bonds are international bonds or Government Bonds (SUN) issued by a country in foreign currency. Currently, the national debt per capita has reached 19 million rupiahs. With the addition of Global Bonds with a 50-year tenor, this situation will result in a significant interest payment burden. which could force the government to cut spending, including BLU funds. This could lead to budget cuts, including BLU funds, and potentially result in a default, which would damage creditor confidence.

 

Question: Can the endowment fund for education be used for other educational purposes, such as scholarships or other similar initiatives?  

● The endowment fund managed by LPDP should not be cut, as it could be used to assist financially disadvantaged students in paying their tuition fees.

 

Question: Regarding macroeconomic assumptions, what are INDEF’s projections for economic growth, the exchange rate, unemployment, and inflation in light of the COVID-19 pandemic?  

● Moderately, economic growth is projected at 3.5%, driven by consumption and investment. The exchange rate could reach Rp18,000-19,000. Regarding the unemployment rate, if economic growth in 2019 was around 5%, then it is assumed that every 1% of economic growth equates to the absorption of 500,000 workers. Thus, it can be imagined that if economic growth in 2020 reached a negative point, there would be a statistically linear increase of 2.5 million new unemployed. Inflation will not exceed 5%; in March, it was 0.1% due to low purchasing power, making it unlikely for merchants to raise prices of goods and necessities in the market.

 

Question: What forms of social safety nets has the government implemented?  

● One such initiative is the government's launch of the Pre-Employment Card program, providing individuals with a training allowance of Rp3,000,000. However, for the unemployed, would it be more beneficial to provide training while they are still struggling to meet their basic needs? Perhaps it would be more effective to transfer the Rp3,000,000 directly to the unemployed, ensuring they can access food and other necessities while they seek employment. Given the current economic climate, it seems that many individuals prioritize their immediate need for sustenance over job training.

 

Question: The final question, in line with the theme of Webinar Series 01: Can the national finances withstand the onslaught of the COVID-19 pandemic?  

● Given the framework or scenario pioneered by Mrs. Sri Mulyani, the Indonesian Finance Minister, I am confident that the Indonesian economy will be able to endure, albeit at a very high cost, namely incurring debt for the next 50 years.

 

Written by (IB and Team)