DETERMINANTS OF GOVERNMENT BUDGET DEFICITS AND THEIR IMPACT ON INDONESIAN FOREIGN DEBT

Abstract

To achieve development goals in a country is determined by various factors, namely human resources, natural resources, technology, social culture and economic systems that apply. The role of the government in the development process is needed through monetary policy and fiscal policy through the APBN. A budget policy aimed to boost economic growth, create jobs, provide services to the community and reduce poverty. In general, developing countries such as Indonesia operates a policy of deficit budgets. Then to finance government expenditures in development expenditures, some are obtained by making foreign debt. Some factors that are thought to influence changes in the government budget deficit are the rate of economic growth, inflation and exchange rates. Furthermore, the government budget deficit and other economic variables are differences in loan interest rates, foreign investment and gross domestic savings which are expected to affect the Indonesian government's foreign debt. This study aims to analyze the factors that can affect government budget deficits and other macro variables that have an impact on foreign debt in Indonesia. This research is descriptive and  verificative using secondary data sourced from the Central Bureau of Statistics (BPS), Bank of Indonesia (BI) and the International Monetary Fund (IMF) for the period 2000-2017. Descriptive research aims to be able to explain the development of government budget deficits and foreign debt, while verivicative research to explain the level of significance of the effects of independent variables on the dependent variable. The research model used is TSLS multiple linear regression with software eviews. The results showed that inflation and the exchange rate of the dollar against the rupiah provide a significant positive effect on the government budget deficit. While economic growth does not have a significant impact on the government budget deficit. Thus the government must try to control the inflation rate and maintain a stable balance of the exchange rate so that the government budget deficit is controlled. As for the implications of the government's budget deficit increased and the difference between lending interest rates in domestic and foreign lending interest rate (US lending interest rates) greater impact significantly to the increase in foreign debt. Foreign direct investment and gross domestic savings do not have a significant impact on Indonesia's foreign debt. Therefore the government strives to carry out its fiscal policies efficiently and effectively and also seeks to control the balance of the stable interest rate on loans, so as to reduce its dependence on foreign debt.

Keyword: 1 Government Budget Deficit · 2 Foreign Debt · 3 Exchange Rates · 4 Lending Interest Rates · 5 Foreign Domestic Investment · 6 Gross Domestic savings.