Firstly, Indonesia has a relatively low debt-to-GDP ratio. This ratio implies that the Indonesian economy produces and sells goods and services sufficient to repay most debt (without needing to incur much more debt). Currently, Indonesia's debt-to-GDP ratio is estimated at 27.3 percent, a very healthy ratio compared to most advanced and developing countries. For example, Japan's debt-to-GDP ratio reached 200 percent, while ratios of China and the Philippines stand at 63 percent and 50 percent, respectively. Government bonds account for about 40 percent of total Indonesian government debt (the remainder being bilateral and multilateral loans).

Indonesia's healthy debt-to-GDP ratio is partly the result of Indonesia's commitment to prudent fiscal management. Ever since the haunting traumas experienced during the Asian Financial Crisis in the late 1990s (when this ratio fell to 150 percent) Indonesian governments have been eager to safeguard financial and fiscal stability.

Secondly, it is mind-easing to know that the majority of Indonesian government debt (approx. 60 percent) is rupiah-denominated and therefore safe from exchange rate volatility.

In December 2015 - when the government engaged in the front loading of this year's bonds - Schneider Siahaan, Director of Debt Portfolio and Strategy within Indonesia's Finance Ministry, said the Indonesian government plans to issue a total of IDR 532.4 trillion worth of new government bonds in 2016 consisting of IDR 402.4 trillion of rupiah-denominated bonds, while the remainder (about IDR 130 trillion) are US dollar-denominated, yen-denominated (samurai bonds), and euro-denominated bonds. Sharia bonds, debt paper that complies with Islamic principles, account for about 24 percent of the total IDR 432.4 trillion worth of bonds to be issued this year. However, if government revenue from taxation is disappointing then the government is expected to seek more funds from the bond market in order to finance its ambitious (infrastructure) development targets.

Meanwhile, there is also few concern that Indonesia's private companies will fail to repay debt obligations in 2016 as there has not been a drastic cut in companies' ratings. However, there could emerge a battle for fresh funds from bond markets in 2016 as companies seek funds to repay maturing bonds. This development can be encouraged by Bank Indonesia if it would decide to cut its benchmark interest rate (BI rate) again at the policy meeting today. Last month the central bank of Indonesia had already cut its BI rate by 25 basis points to 7.25 percent. Indonesia's private sector is expected to issue between IDR 60-65 trillion of new corporate bonds in 2016 (both for refinancing and further business expansion).

Maturing Debt Paper of Indonesia's Public and Private Sector:

Year Government
Debt Paper
2016     268.06  52.83    320.89
2017      88.20  63.94    152.14
2018     119.57  58.61    178.18
2019      98.83  30.69    129.52
2020      68.06  26.68     94.74
2021      87.06  15.29    102.35
2022      63.20  12.99     76.19
2023      65.15   4.64     69.79
2024     152.05   0.36    152.41

Source: Kontan