Update COVID-19 in Indonesia: 4,066,404 confirmed infections, 131,372 deaths (28 August 2021)
15 September 2021 (closed)
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Indonesia's outstanding government debt rose sharply. By the end of 2015, total government debt stood at IDR 3,089 trillion (approx. USD $222.2 billion), or 27 percent of the country's gross domestic product (GDP) according to a statement from Indonesia's Finance Ministry. One year earlier - at end 2014 - the nation's debt-to-GDP ratio was 24.7 percent (or IDR 2,608.8 trillion). Ever since the end of the Asian Financial Crisis in the late 1990s, Indonesia's debt-to-GDP ratio has eased from over 150 percent to a healthy range of 26-29 percent in recent years.
Compared to most other countries, Indonesia's debt-to-GDP ratio is very healthy at 27 percent of GDP in 2015. Due to traumatic experiences during the Asian Financial Crisis, Southeast Asia's largest economy has implemented prudent fiscal and financial policies. Law No. 17/2003 concerning State Finances stipulates that Indonesia's central and local government debt should not exceed 60 percent of GDP.
Langgeng Subur, an official at Indonesia's Finance Ministry, said there are a number of indicators that show the government's commitment to safeguard a healthy and manageable debt level. For example, the average maturity of government debt is currently safe at 9.7 years. Moreover, the portion of rupiah-denominated debt has risen to 52.6 percent of total outstanding debt, implying that the country is less vulnerable to rupiah exchange rate volatility. Lastly, 86.2 percent of total debt has a fixed interest rate, hence being relatively safe from global interest rate adjustments.
Regarding the State Budgets of 2015 and 2016, Subur added that another positive development is that government debt is now used more productively (for example on infrastructure development) and therefore has added-value on the long-term.
However, Executive Director of the Institute for Development of Economics and Finance (Indef) Enny Sri Hartati said the government needs to keep a close eye on the primary balance (i.e. government net borrowing or net lending, excluding interest payments on consolidated government liabilities) as the growing primary balance deficit raises the risk of a default. Hartati added that it is not wise to look at the debt-to-GDP ratio only to determine whether the debt situation is safe. For example, countries like the USA and Japan have debt-to-GDP ratios of over 100 percent but are still considered stable. Key is the productive use of debt.
Per 30 November 2015, Indonesia's primary balance deficit stood at IDR 177.6 trillion (approx. USD $12.8 billion), up a staggering 266 percent from the target set in the 2015 State Budget (IDR 66.8 trillion) as tax collection was weak, while the government increased spending.