Jakarta, CNBC Indonesia – Acting (Pj) Governor of South Sulawesi Bahtiar Baharuddin said some time ago that the province he leads is experiencing bankruptcy. Meanwhile, the word bankruptcy he uses refers to the South Sulawesi Provincial Government’s budget deficit which has now reached IDR 1.5 trillion.

Bahtiar conveyed the condition of the South Sulawesi budget during his introductory speech to the financial note and the draft South Sulawesi regional regulations regarding the 2024 APBD at the plenary meeting at the South Sulawesi DPRD, Wednesday (11/10).

“We have a deficit of IDR 1.5 trillion, South Sulawesi is bankrupt. I am the leader, captain, the South Sulawesi ship has sunk,” said Bahtiar, quoted Monday (16/10/2023) from detik.com.

This automatically attracts the attention of many parties. The Special Staff of the Minister of Finance for Strategic Communications, Yustinus Prastowo, also had to correct Bahtiar’s statement, saying that his region had gone bankrupt due to a budget deficit of IDR 1.5 trillion.

Special Staff to the Minister of Finance for Strategic Communications, Yustinus Prastowo, specifically revealed the Ministry of Finance’s response to the financial conditions revealed by Bahtiar. According to him, the use of the word bankrupt does not accurately describe the current condition of the South Sulawesi budget.

“The Ministry of Finance’s response is that the use of the term “bankruptcy” is actually inappropriate to interpret the South Sulawesi Provincial Government’s inability to pay off short/long term debts this year,” said Prastowo to CNBC Indonesia, quoted Saturday (14/10/2023).

According to him, the real problem that the South Sulawesi Provincial Government (Pemprov) is currently experiencing is not bankruptcy, but liquidity difficulties resulting from short-term debt management that is not careful or prudent.

The results of the analysis of the Regional Government Financial Report (LKPD) in 2022 and the Budget Realization Report (LRA) in 2023 of the South Sulawesi Provincial Government show unhealthy financial performance, especially in the liquidity aspect. In 2023, there are short-term debts due and long-term debts which are the obligations of the Provincial Government.

“For the record, the problem experienced by the South Sulawesi Provincial Government is liquidity (difficulty paying off short-term debt), not solvency (difficulty paying off long-term debt) considering that principal installments of long-term debt have been budgeted for in the 2023 APBD for financing expenditures,” said Prastowo.

He emphasized that these high debt obligations could actually be avoided by optimizing income and spending efficiency, considering the high accumulation of surplus financing budget (SILPA) in 2023 and previous years.

“As of September 2023, the Provincial Government’s SILPA was at IDR 676 billion, and this condition is predicted to remain the case until the end of the year considering the increasing trend of PAD (regional original income) realization and the pattern of SILPA accumulation in the previous two years,” he added.

As a solution to this problem, Prastowo admitted that the Ministry of Finance suggested that the South Sulawesi Provincial Government could carry out short-term debt negotiations, long-term debt restructuring, optimize income and efficiency and reallocate spending to reduce SILPA, and/or refinancing as a final step.

Referring to the APBD Data Portal of the Directorate General of Financial Balance of the Ministry of Finance as of August 12 2023, the realization of the South Sulawesi APBD is still a surplus of IDR 1.58 trillion, even though the 2023 APBD is designed to be a deficit of IDR 1.24 trillion.

The surplus is due to the realization of regional income which has reached IDR 27.48 trillion or 61.75% of this year’s target of IDR 44.51 trillion and the realization of expenditure has only reached IDR 25.90 trillion or 56.6% of the target of IDR 45.76 trillion.

Even so, in terms of financing or debt realization, it has indeed reached IDR 1.58 trillion or 126.93% of this year’s APBD target of IDR 1.24 trillion. Regional financing expenditure in the form of principal installment payments on maturing debt has reached IDR 220.3 billion or 58.46% of the target of IDR 376.87 billion.

[Gambas:Video CNBC]

(haa/haa)