Indonesia's public debt - as a percentage of the nation's gross domestic product (GDP) - currently stands at 27 percent, or roughly IDR 3,200 trillion (approx. USD $241 billion). This debt is manageable and actually quite low compared to other key emerging economies or advanced economies. For example, Malaysia's and Brazil's public debt-to-GDP ratios reached 56 percent and 70 percent, respectively. Meanwhile, the ratios of the USA and Japan stand at 105 percent and 246 percent, respectively. However, the level of debt is not that important. The important question is how is this debt used?

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After it was decided to postpone talks between the Indonesian government and the House of Representatives (DPR) about the tax amnesty bill (talks have been postponed until April 2016), the government is in need of formulating a new tax revenue target as the late implementation of the tax amnesty program could mean the government will miss out on tens of trillions of rupiah (billions of US dollars) in tax revenue this year. Indonesia's tax amnesty bill, proposed last year, will make it easier for tax evaders to come clean and repatriate their funds into Indonesia.

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Indonesia's Finance Ministry will sell rupiah-denominated Islamic bonds (known as Sukuk) on Tuesday (26/01). The ministry set an indicative target of IDR 4 trillion (approx. USD $288 million). Proceeds from the bond sale will be used to finance the government's budget deficit. This deficit is estimated to reach 2.15 percent of gross domestic product (GDP) in the 2016 State Budget.

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The Finance Ministry of Indonesia released a statement on Sunday (03/01) saying that Indonesia failed to meet the majority of economic targets that were set in the (revised) 2015 State Budget. Primary reasons for the weaker-than-targeted performance are low commodity prices, sluggish global economic growth, China's economic slowdown, and capital outflows triggered by the tighter monetary policy of the US Federal Reserve. Only realization of inflation and the treasury yield were in line with the government's targets.

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As Indonesia's budget deficit may widen to 2.78 percent of gross domestic product (GDP) in 2015, the government is ready to seek USD $5 billion through multilateral loans and private placement. Scenaider Siahaan, Director for Strategy and Debt Portfolio at the Finance Ministry's Directorate General of Debt Management, said it involves standby loans that can be disbursed in the two weeks ahead if needed. The main reason why the budget deficit may be wider than expected is Indonesia's weaker-than-estimated tax revenue.

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One advantage of Indonesia's non-optimal government spending is that it somewhat covers for the shortfall of tax revenue that is expected to occur in 2015. The shortfall in tax collection may reach up to IDR 250 trillion (approx. USD $18 billion) and this failure to meet the government's tax collection target in the 2015 State Budget was the reason behind the resignation of Sigit Priadi Pramudito as Director General of Indonesia's Tax Office. But with government spending estimated to reach only about 90 percent of this year's target, the budget deficit should not go beyond the 2.7 percent of gross domestic product (GDP) mark.

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A Finance Ministry official said Indonesia's state budget deficit is likely to exceed the projected IDR 300 trillion (approx. USD $22 billion) in 2015, pushing the deficit to 2.7 percent of Indonesia's gross domestic product (GDP), dangerously close to the maximum 3 percent of GDP cap that is set by a 2003 law. In the original 2015 State Budget the government targeted a budget deficit of 1.9 percent of GDP. This target was then revised to 2.2 percent in September. However, another revision is needed due to poor tax revenue collection.

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In order to tackle an estimated shortfall of more than IDR 260 trillion (approx. USD $17.5 billion) in the 2015 State Budget, the Indonesian government starts selling government bonds to Indonesian retail investors today (21/09). In the original 2015 State Budget the government projected a deficit of 1.9 percent of the country’s gross domestic product (GDP). Recently, this figure was raised to 2.23 percent of GDP due to disappointing tax revenue amid weak economic growth.

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Indonesia's budget deficit could rise to 2.2 percent of the nation's gross domestic product (GDP) in 2015 (from a projected 1.9 percent of GDP) as the government's tax revenue may fall short of its target. Based on the revised 2015 State Budget, the government targets to collect IDR 1,489 trillion (approx. USD $110 billion) worth of tax money this year. However, as of August 2015 tax revenue collection stood at 45.8 percent of the 2015 target (or approx. IDR 593 trillion).

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Based on data from the Inter Dealer Market Association, Indonesia’s ten-year sovereign bond yield climbed 31 basis points since 4 September 2015 to 9.24 percent, its highest level since 2010, on Friday morning (11/09) amid concern about the ailing rupiah. The rupiah has been under pressure as emerging market currencies have become unattractive ahead of a looming US interest rate hike and China’s recent decision to devalue its yuan (triggering concern about a currency war among Asia’s emerging currencies).

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The Indonesian government decided not to revise its 2018 State Budget despite the fact that a couple of assumptions in the budget - such as the rupiah exchange rate or the oil price - differ markedly from the actual (real) level in the first half of 2018. After a meeting at the Presidential Palace in Bogor, Finance Minister Sri Mulyani Indrawati told reporters that President Joko Widodo will not adjust these assumptions due to a number of considerations.

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Indonesia's tax revenue realization in the first half of 2016 was disappointing. According to the latest data, Southeast Asia's largest economy collected a total of IDR 518.4 trillion (approx. USD $39.6 billion) worth of tax revenue (including customs and excise) in the first six months of 2016, down 3.3 percent (y/y) from tax revenue realization in the same period one year earlier, and only 33.7 percent of total targeted tax revenue (IDR 1,539.2 trillion) set in the revised 2016 State Budget. The disappointing performance is mainly due to weak tax income from the oil and gas sector.

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In a plenary session on Tuesday (28/06), Indonesia's House of Representatives (DPR) passed the controversial Tax Amnesty Bill into law as well as the revised 2016 state budget. The Indonesian government will be relieved to see the Tax Amnesty Bill come into effect on 1 July 2016 (ending in May 2017) as it expects the bill to boost tax revenue this year by IDR 165 trillion (approx. USD $12.4 billion). Through tax incentives and the pardoning of tax crimes, the tax amnesty program makes it attractive for tax evaders to declare their offshore assets and repatriate these into Indonesia.

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The Indonesian government sold €3 billion worth of euro-denominated bonds (Surat Utang Negara, or SUN) on Tuesday (07/06) consisting of €1.5 billion of 7-year tenure bonds with a yield of 2.772 percent and €1.5 billion of 12-year tenure bonds with a yield of 3.906 percent. Combined, the issuance was oversubscribed 1.79 times with a total book order for the dual-trance bonds at €8.36 billion. Robert Pakpahan, Director General of Financing and Risk Management at Indonesia's Finance Ministry, said funds will be used to finance the 2016 budget deficit, which is expected to widen to 2.48 percent of GDP.

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In the past two weeks, two of the big international credit rating agencies released new reports about Indonesia's fiscal situation. Both agencies affirmed Indonesia's sovereign debt rating: Fitch Ratings kept Indonesia at BBB-/stable (investment grade class) and Standard & Poor's (S&P) maintained Indonesia at BB+/positive (highest junk level, one notch below investment grade). S&P's decision to keep Indonesia within the junk level category was met with disappointment among investors and Indonesian government officials but perhaps not that surprisingly.

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So far this year, realization of government revenue in Indonesia (up to 8 May 2016) has reached IDR 419.2 trillion (approx. USD $32 billion), roughly 23 percent of the full-year revenue target in 2016 (IDR 1,822.5 trillion). This result is weaker compared to last year when the government collected IDR 476.3 trillion in the period 1 January - 15 May 2015, or 27 percent of the full-year target. Meanwhile, government spending reached IDR 586.8 trillion between 1 January and 8 May 2016, or 28 percent of the full-year target (IDR 2,095.7 trillion), roughly the same as government spending during the same period last year.

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The Indonesian rupiah exchange rate and Indonesian stocks gained on the last trading day of the week in line with the performance of other emerging markets. Indonesia’s benchmark stock index (Jakarta Composite Index, abbreviated IHGS) rose 0.09 percent to 5,216.67 points, while the rupiah appreciated 0.22 percent to IDR 12,647 according to the Bloomberg Dollar Index. The positive performance was mainly caused by speculation that the unexpected fall in US wages will keep the US central bank from raising its key interest rate soon.

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Indonesia’s House of Representatives (DPR) approved the 2015 State Budget on Monday (29/09) that was proposed by the outgoing President Susilo Bambang Yudhoyono administration. The budget deficit is now set at IDR 245.9 trillion (USD $20.5 billion), equivalent to 2.21 percent of gross domestic product (GDP), and lower than the 2.32 percent of GDP proposed by the government in both the Financial Memorandum and the Revised 2015 State Budget. However, the accepted budget deficit is still high compared to previous years.

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The Indonesia rupiah exchange rate depreciated 0.16 percent to IDR 11,992 per US dollar on Monday (23/06) according to the Bloomberg Dollar Index, thus extending the currency’s recent depreciating trend. Meanwhile, Bank Indonesia's benchmark rupiah rate (known as the Jakarta Interbank Spot Dollar Rate, or, abbreviated JISDOR) depreciated 0.03 percent to IDR 11,971 against the greenback. What were the factors that influenced the rupiah’s performance today?

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In a plenary session of Indonesia’s House of Representatives (DPR) on Wednesday evening (18/06), the parliament approved the government’s proposed revised state budget of 2014 (RAPBN-P 2014). Prior to this approval, the revision had already been discussed for a month between the House of Representatives’ Budget Committee (Banggar) and the government. Almost all components of the 2014 State Budget have been revised from the government’s earlier assumptions.

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