Friday, April 19, 2024

Government debt reaches Rp8,319.2 trillion by February 2024

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Audina Nur

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The government’s debt has reached Rp8,319.2 trillion (US$522.3 billion) by February 29, 2024, an increase from the end of January, which amounted to Rp8,253.09 trillion. This government debt is equivalent to approximately 39.06 percent of the gross domestic product (GDP), continuing the all-time high trend.

The Ministry of Finance, in the March 2024 edition of the State Budget Book, noted that the debt ratio in February was still below the safe limit of the debt ratio according to Law No. 17/2023, which stands at 60 percent. The Ministry of Finance emphasized that portfolio debt management plays a significant role in maintaining overall fiscal sustainability.

“Therefore, the government consistently manages debt carefully and measurably by maintaining optimal interest rate, currency, liquidity, and maturity risks,” the Ministry of Finance said in a report as quoted on Monday, April 1, 2024.

Additionally, the government prioritizes debt procurement with medium to long-term maturity and actively manages debt portfolios. By the end of February 2024, the government’s debt maturity profile was relatively safe, with an average time maturity (ATM) ranging around 8 years. Comparing the debt-to-GDP ratio over the past three years, the ratio this year tends to decrease. At the end of 2021, the debt ratio reached 40.74 percent, then decreased to 39.7 percent in 2022, and by the end of last year, it was at 38.98 percent.

Looking at the debt composition, the majority consists of domestic government securities (SBN) with a share of 88.19 percent, equivalent to approximately Rp5,947.95 trillion.

Meanwhile, foreign exchange SBNs accounted for 16.07 percent or approximately Rp1,388.92 trillion. The government also borrowed from domestic and foreign loans amounting to approximately Rp982.35 trillion or 11.81 percent of the total debt.

Disciplined debt management also supports credit rating assessments from credit rating agencies (S&P, Fitch, Moody’s, R&I, and JCR), which have maintained Indonesia’s sovereign rating at investment grade amidst global economic dynamics and financial market volatility.

On March 15, 2024, Fitch reaffirmed Indonesia’s credit rating at BBB with a stable outlook. Maintained economic stability and relatively low government debt-to-GDP ratio are among the factors strengthening Fitch’s positive outlook for Indonesia’s medium-term growth prospects.

However, Fitch noted that national revenue remains a challenge for Indonesia, especially among countries with a BBB rating. “However, national revenue and structural indicators that are still relatively lower compared to ‘BBB’ rated peers remain a challenge for Indonesia,” the global rating agency wrote in an official statement, as quoted on Tuesday, March 19, 2024.

Audina Nur

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