The three Indonesian presidential hopefuls outlined their strategies for managing the country’s foreign debt, shedding light on their distinct approaches and perspectives. The three presidential candidates − Anies Baswedan, Prabowo Subianto and Ganjar Pranowo − presented their insights at the third debate session for the 2024 Presidential Election on Sunday evening.
Prabowo Subianto advocates prudent management and economic strategies
Presidential Candidate Number 2, Prabowo Subianto, asserted that Indonesia’s foreign debt remains at a safe level, accounting for approximately 40 percent of the Gross Domestic Product (GDP).
He emphasized that this ratio is relatively low on a global scale. Prabowo urged for prudent debt management coupled with effective economic strategies, particularly emphasizing downstream sectors.
His proposal hinges on fortifying Indonesia’s bargaining position by developing downstream industries, alleviating concerns of external interference in the nation’s debt affairs.
Additionally, Prabowo recommended establishing a robust resilience system to safeguard Indonesia’s wealth, economy, and developmental pursuits.
Anies Baswedan highlights concerns and proposes a safe debt limit
Contrary to Prabowo, Presidential Candidate Number 1, Anies Baswedan, voiced concerns about the potential risks of Indonesia’s foreign debt to national sovereignty.
He suggested establishing a safe limit for debt in developing and middle-income countries, including Indonesia, proposing a maximum debt-to-GDP ratio of 30 percent.
Anies stressed the importance of organized debt management, GDP expansion, and the implementation of creative schemes for foreign debt acquisition, potentially involving the private sector.
He emphasized the need to minimize tax leaks, broaden the taxpayer base, and ensure that debt is strategically utilized in productive sectors, cautioning against non-productive uses of borrowed funds.
Ganjar Pranowo cautions on debt risks and prioritizes economic growth
Presidential Candidate Number 3, Ganjar Pranowo, adopted a cautious stance on debt, emphasizing the necessity for careful calculation, particularly for high-risk infrastructure projects.
He underscored the potential dangers of excessive borrowing, citing historical instances where countries collapsed due to unsustainable debt levels.
Ganjar highlighted the importance of strengthening domestic industries, particularly in the defense sector, and called for robust economic growth of 7 percent, coupled with effective governance to achieve a 4 percent decrease in the icore index.
He stressed the urgency of improving the business environment to foster economic growth and warned against uncontrolled debt.
National debt overview and government perspective
As of the end of 2023, Indonesia’s government debt has reached Rp 8.041 trillion (US$ 518 million). Despite the significant increase, the government views this amount as within a safe limit.
Suminto, the Director-General of Financing and Risk Management at the Ministry of Finance, encouraged a comprehensive view of debt, considering not only nominal figures but also various debt portfolio indicators and risks.
Suminto pointed out that Indonesia’s debt-to-GDP ratio, at 38.11 percent, is well below the legal limit of 60 percent.
He also highlighted improvements in currency risk, with a decrease in outstanding government debt in foreign currency from 37.9 percent to 27. percent by November 2023.
Suminto assured that the majority of government debt is fixed-rate, reducing sensitivity to market interest rate fluctuations.
